The Truth Behind Common Credit Score Myths

There are two types of credit inquiries: soft and hard. When you check your own score — whether through your bank, a credit monitoring service, or AnnualCreditReport.com — it registers as a soft inquiry. Soft inquiries are invisible to lenders and do not affect your score at all.

Hard inquiries occur when a lender reviews your credit as part of a loan or credit application. These can temporarily lower your score by a few points. Knowing the difference means you can monitor your credit freely and confidently without fear of self-inflicted damage. In fact, regular self-monitoring is one of the healthiest credit habits you can build. See how to read your credit report for a step-by-step walkthrough.

Credit utilization — the percentage of your available credit you're currently using — accounts for a significant portion of your credit score. When you close a card, you eliminate that card's credit limit from your total available credit. If you're carrying any balances elsewhere, your utilization ratio rises immediately.

Additionally, older accounts contribute to the average age of your credit history, another scoring factor. Closing your oldest card can shorten that average and negatively affect your score. Before closing any card, weigh these trade-offs carefully. There may be legitimate reasons to close an account (such as high fees), but it's rarely a straightforward win for your credit health. Learn more about the factors that shape your credit score.

This myth likely persists because people confuse 'using credit' with 'carrying debt.' What matters for your score is that you use your credit account and pay on time — not that you leave a balance unpaid. Carrying a balance month to month simply means you'll be charged interest, which benefits the card issuer, not your score.

Paying your statement balance in full each billing cycle demonstrates responsible use, avoids interest charges, and keeps your utilization low. That combination is far better for your credit health than intentionally keeping a balance.

Credit scores are calculated based on your borrowing and repayment behavior — things like payment history, amounts owed, length of credit history, credit mix, and new credit inquiries. Your salary, hourly wage, or employment status does not appear in these calculations.

Lenders may separately consider your income when evaluating a loan application to assess your ability to repay, but that is a distinct process from credit scoring. A high earner with a history of missed payments will have a lower score than a modest earner with a spotless repayment record. For a full breakdown, see what your credit score actually measures.

Payment history is the most heavily weighted factor in most credit scoring models. A payment that is 30 or more days late is typically reported to the credit bureaus and can cause a noticeable drop in your score — sometimes significant depending on where your score currently sits.

That negative mark doesn't vanish quickly: most derogatory information, including late payments, stays on your report for seven years under the Fair Credit Reporting Act (FCRA). The good news is that the impact of older late payments diminishes over time, particularly as you build a consistent record of on-time payments afterward. Understanding why scores can drop unexpectedly can help you catch and address issues early.