Credit scores influence everything from mortgage rates to insurance premiums. Yet misinformation keeps many borrowers paying more than necessary. Retirees and younger borrowers alike fall for persistent myths that hurt financial decisions. Higher rates often result not from reality but from misunderstanding. Here are 10 credit score myths costing people money.
1. Checking Your Score Hurts It
Many believe pulling their own score lowers it. In truth, “soft inquiries” don’t affect credit. Only hard inquiries from lenders matter. Retirees avoiding checks miss valuable insights. Knowing your score is always safe.
2. Closing Old Accounts Improves Scores
Shutting old accounts reduces credit history length and available credit. This can drop scores, not raise them. Retirees trying to “simplify” sometimes damage their credit. Old accounts add valuable history. Keep them open when possible.
3. Carrying a Balance Helps Your Score
Some believe small balances prove creditworthiness. In reality, carrying balances just incurs interest. Paying in full improves utilization ratios. Retirees lose money chasing this myth. Zero balances are healthiest.
4. Debit Card Use Builds Credit
Debit cards connect to bank accounts, not credit bureaus. Using them doesn’t raise scores. Retirees relying only on debit miss opportunities. Credit must be reported to build history. Debit alone doesn’t help.
5. Income Directly Affects Score
Lenders care about income, but credit bureaus don’t track it. Retirees with modest pensions can still have excellent credit. Scores reflect payment history and utilization. Income is irrelevant in the formula.
6. All Debt Hurts Credit Equally
Mortgages and student loans build history when paid on time. High-interest revolving debt harms more. Retirees who avoid all debt may lack strong scores. Responsible debt builds credibility. Not all balances are bad.
7. Paying Off Collections Removes Them
Collections often remain on reports even after payment. While their impact lessens, they don’t vanish. Retirees expecting a clean slate may be disappointed. Only time reduces their effect completely. Paying helps, but doesn’t erase history.
8. Credit Scores Are the Same Everywhere
Different bureaus and scoring models create variations. Retirees comparing multiple reports may see different numbers. All are valid but used differently. Consistency matters more than exact matching. Multiple scores exist by design.
9. Opening Many Accounts Builds Credit Quickly
Too many applications trigger hard inquiries and lower scores. Retirees chasing quick improvements often backfire. Time and patience matter most. Credit grows steadily, not instantly. Multiple accounts aren’t shortcuts.
10. Paying On-Time Is the Only Factor
On-time payments matter most, but utilization, history, and account mix count too. Retirees focusing only on timeliness may miss other improvements. Holistic strategies raise scores faster. Credit health is multifaceted.
The Takeaway on Credit Myths
Credit scores drive financial opportunities, but myths drive mistakes. Retirees and borrowers who understand the truth save thousands in interest. Awareness replaces fear with control. The right knowledge lowers costs immediately. In credit, facts always beat myths.
Which credit score myths have you believed before, and did they end up costing you higher interest rates?
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Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.