The Credit Score Myths That Keep Americans Confused

There are two types of credit inquiries: hard inquiries, triggered when a lender pulls your report to evaluate a credit application, and soft inquiries, which include checks you initiate yourself. Only hard inquiries can affect your score, and even then the impact is typically small and temporary. Monitoring your own credit regularly is actually a best practice — it helps you catch errors and signs of identity theft early. You're entitled to free weekly reports from all three major bureaus at AnnualCreditReport.com.

This myth likely originates from a confusion between using a card and carrying a balance. You do need to use a card periodically to generate activity that reporting bureaus can evaluate. But the scoring models don't reward you for paying interest. In fact, carrying a balance increases your credit utilization ratio, which can hurt your score. Paying in full each statement cycle demonstrates responsible use without costing you anything in finance charges.

When you close a credit card, you lose that card's credit limit from your total available credit. If you're carrying balances on other cards, your overall utilization ratio rises immediately, which can negatively affect your score. Additionally, if the card is one of your oldest accounts, closing it may eventually reduce your average account age. There are situations where closing a card makes sense — for instance, if it carries a high annual fee and you're not using it — but the decision deserves careful thought. For a detailed breakdown of the mechanism, see why closing a credit card can hurt your score.

Credit scores are built entirely from the data in your credit report — account history, balances, payment record, inquiries, and the types of credit you hold. A person earning a high salary with significant savings can have a poor credit score if they have a history of missed payments or high utilization. Conversely, someone with a modest income can maintain an excellent score through consistent, responsible credit behavior. Lenders may separately consider income when evaluating a loan application, but that assessment is distinct from the credit score itself.

Payment history carries the most weight of any factor in FICO scoring — 35%. A payment that is 30 or more days late can cause a meaningful drop, especially if your score was high to begin with. The negative mark can remain on your credit report for seven years from the date of the original delinquency. The good news: its impact typically diminishes over time as you build a record of on-time payments. But the lesson is clear — consistent, on-time payment is the single most important habit for protecting your score.

A credit score is a measure of how you manage credit — not simply whether you avoid it. If you've never held a credit card, loan, or other reported account, the major bureaus may have insufficient data to generate a score at all. This is sometimes called being "credit invisible." Lenders generally view a strong, established credit history more favorably than no history. Building credit responsibly — through a secured card, a credit-builder loan, or being added as an authorized user on an established account — is usually better than avoiding credit entirely.