3 common credit score myths debunked

The path to financial success is paved with facts. Sharpening your understanding of how things work could set you up for a brighter, more secure future.

A higher credit score could open doors to more financial opportunities—and help you keep more of your money in your pocket. But persistent (and untrue) myths could be holding you back from reaching the score you deserve. 

Are you ready to become a credit score myth-buster? Let's tackle three common misconceptions.

Myth 1: Checking your credit score lowers it

False. You can check your own credit score without hurting it. 

Any time someone (that includes you) accesses your credit file, that’s an inquiry. Some inquiries could cause your credit score to temporarily drop by a few points. Those are called hard inquiries, and they usually happen when you apply for credit.

Examples of hard inquiries:

• You apply for a mortgage

• You apply for a personal loan

• You apply for a car loan

• You ask for a credit limit increase on your credit card

• Sometimes, getting mortgage pre-approval results in a hard inquiry

Hard inquiries stay on your credit report for two years. They only affect your credit score for one year, and the effect on your score diminishes over that time. 

When hard inquiries don’t count

Some kinds of hard inquiries are treated differently. For instance, you’re allowed to shop around for a mortgage because that’s the smart thing to do. All the mortgage applications you submit within a single shopping window count as just one inquiry against your score. The shopping window could vary from 14 to 45 days, depending on the type of credit score being calculated. The same is true for auto loans and student loans.

Other inquiries are called soft inquiries, and they don’t affect your score at all. 

Examples of soft inquiries:

• You check your own credit.

• A credit card issuer checks your credit for the purpose of sending you an unsolicited “pre-approved” or “pre-selected” offer.

• Your credit card issuer periodically checks your credit for the purpose of account maintenance.

• You apply for a new job and the employer checks your credit history.

• A lender offers to tell you what rate you might qualify for by doing a soft credit check

• You apply for a new utility or cell phone account that isn’t prepaid.

None of these inquiries would have any effect on your score. 

Should you check your own credit? Yes. Especially if you’re working on improving it. Most actions won’t make it change overnight, so there’s usually little reason to check your score more than once every couple of months.

Myth 2: Closing credit card accounts will boost your score

Nope. Closing credit card accounts could actually hurt your credit score in two ways. One is often an immediate effect. The other happens in the future.

Utilization ratio

A large part of your credit score is based on your credit utilization ratio. That’s your credit card balances compared to your credit limits. Utilization is calculated for each card and overall. 

If you owe $400 on a credit card with a $1,000 limit, your utilization is 40%. 

If you open a second credit card with a $1,000 limit and you don’t have a balance on it, your overall utilization immediately drops to 20% ($400 balance compared to $2,000 total credit limit). Your credit score is likely to improve when this happens.

Closing one of the accounts immediately brings your utilization back up to 40%, and your credit score would likely lose points.

Account age

A small part of your credit score is based on the age of your credit accounts. The scoring models look at the average age of all the accounts as well as the age of your oldest account.

• If you got a single credit card 10 years ago, your account age is 10 years.

• If you added a mortgage eight years ago, your average account age is 9 years.

• If you add a new credit card account today, your average account age drops to 6 years.

The effect of closing accounts is a little more complex. Accounts paid off in good standing continue to factor into your credit score for 10 more years. 

Over the long term, closing old accounts and opening new ones pushes down your average account age. To have a high average account age, keep your old credit accounts open and avoid applying for new credit.

Should you close an account? It depends. You might not want an old credit card account if you think there’s a chance you could be tempted to run up the balance. You might be looking forward to saying goodbye to a credit card you’ve worked hard to pay off. You could even close an account with a balance, although that is likely to cause a temporary negative effect on your score until you pay it off. If you’ve got a reason to close a card, do it. With no regrets. It’s smart to put your financial well-being first. 

Myth 3: Your credit score is affected by getting married or divorced

Actually, no. Your credit score is based on your history with credit.

Your credit score is never merged with anyone else’s. Even if you get married. The only way to mix credit data with your partner’s or any other person’s is to share an account. 

Here are some of the ways a single account could affect more than one person’s credit. 

• Joint account: Both names are on the account. You own it equally. You’re both responsible for any debt associated with the account.

• Co-signer: This person agrees to be responsible for someone else’s debt, but they don’t get the benefit of the debt. The primary borrower gets the loan or credit card, and the co-signer’s responsibility kicks in if the primary borrower defaults.

• Co-borrowers: Two or more people are named on a loan. They all get access to the loan funds, and they are all responsible for repayment.

• Authorized user: One person owns the account. The other person is authorized to use it but isn’t responsible for it.

Should you share accounts with your spouse? Many people have both individual and shared accounts after they get married. For instance, you might get a mortgage together but have separate credit cards. You and your spouse are the only ones who can decide how to manage your finances together. Know, however, that it may be difficult and time-consuming to disentangle yourself financially from your partner if you ever separate. Start having money conversations, starting before you tie the knot. 

Winning credit score factors to focus on

The keys to a great credit score are easy to learn and remember. And most of them are easy to implement in your daily life.

One of the most important habits you can develop in life is to pay your bills on time. Slaying the late-payment beast gets you more than one-third of the way to good credit.

Keeping your credit card balances low could be a little trickier, but it’s critical. We fall into debt for many reasons, and it’s not always easy to climb out. That’s a challenge that’s worth taking on, though, because people with top credit scores have very low utilization ratios. Generally speaking, as credit card balances go down, credit scores go up. 

Account age and hard inquiries, as we’ve already pointed out, affect your score. So keep accounts open when it makes sense to do so, and don’t apply for more credit unless you really need to. 

The last factor is something called credit mix. Your experience with different kinds of credit accounts factors into your score. For most people, credit mix develops naturally over time as we pick up mortgages, student loans, car loans, credit cards, and so on.

What's next:

1. Check your credit reports for free at AnnualCreditReport.com.

2. Check your credit score for free. Your bank, credit union, or credit card issuer might offer free credit scores. Otherwise, find one online. If you’re asked for a credit card number, start over. You don’t have to pay to check your score. Wherever you check it, they should tell you something about what factors are affecting it the most.

3. Focus on the factors you can control, like paying bills on time, lowering credit card debt, and avoiding new applications.