13 Things About Credit Scores You've Probably Been Getting Wrong All Along

Spoiler alert: You might want to think twice before closing a credit card.

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Raise your hand if the world of credit scores confuses the hell out of you. 🙋🏽‍♀️This is one intimidating animal you'd probably rather ignore, but good credit can influence some major milestones — like getting your first car or buying a house.

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It's just hard to be a next-level adult when you don't even know if you're doing all the right things.

So to settle things once and for all, we decided to find out whether these common credit score myths are true or false — with the help of Jim Droske, the president of Illinois Credit Services.

But before we ~dive right in~, there's something you should know: Much like Severus Snape, credit card scores are often misunderstood.

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"Credit scores are not a grade of what you've done in the past," Droske said. "They’re designed to help lenders make a decision on whether or not they want to extend you credit — if I lend you money, will you pay me back? Lenders look at how your activity is trending so they can figure out what you’re likely to do in the next 24 months."

Now that we've cleared the air and there are no hard feelings, here are some common beliefs about credit scores — and whether or not they're actually true:

1. "Checking your credit score or report will ultimately lower your credit score."

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True or false? False.

The facts: There are two types of credit inquiries: a soft inquiry and a hard inquiry. If you look at your own score, this is a soft inquiry that will not affect your report. Services like Experian allow you to check your credit score for free — which can be a good habit to get into. Hard inquiries, on the other hand, occur when you apply for additional credit and a lender asks to look at your credit history, and this can bump your score down a bit.

"If you look at your report 10 times a day, will that change your ability to pay your bills in the next 24 months? No. You’re just looking at your credit," Droske said. "But what if you apply for a Target or Kohl's credit card and go shopping for a car loan? That could affect your credit because you’re shopping for new credit. If someone has the ability to extend you credit, that’s a hard inquiry and that is what will be calculated into your credit score."

2. "Opening a new credit card will lower your credit score."

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True or false? It depends.

The facts: Building up credit history is basically inescapable. Remember, lenders need strong clues about your ability to manage money. "If you aren’t displaying credit card activity, they aren’t confident in your ability to manage this debt," Droske said. "So if you don’t already have a credit card and you get one, that could increase your credit score."

But again, getting a new credit card means opening up a hard inquiry — and we know hard inquiries can be a bit of a drag sometimes. However, if you already have a good credit score, that shouldn't deter you from going forth and getting a new card. "Once you’re already in a healthy position, your score won’t be too badly impacted unless you open up like four new cards or start doing different things aggressively," Droske said.

Bonus facts: It's totally normal for your score to fluctuate regularly! Droske calls this a healthy score migration. Your credit score can actually vary anywhere from 10 to 15 points at any given time.

3. "A credit score and FICO score are the same thing."

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True or false? This is kinda true.

The facts: If you thought the two were totally different, you're not alone! A FICO score is just a type of credit score. There are actually a number of different credit scoring systems out there, and most typically have the same range (300–850), but just use different information and algorithms. "At the end of the day, the only one that really matters is the one that gets looked at when you’re trying to get a loan," Droske said. "Right now, that’s usually the FICO score."

4. "Paying off debt increases your credit score."

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True or false? Yes...but also, no.

The facts: The short answer is: it depends on the type of debt you pay off. Paying off credit card debt can help raise your credit score. However, paying off installment debt — debt that must be repaid in full over a specified amount of time — doesn't improve your credit score. One super common example of installment debt = a car loan.

"People tend to pay off installment loans sooner because they think that’s going to increase their score," Droske said. "They think, 'I borrowed money for a car loan for 16 months but I paid it off in eight months.' That is not improving your credit score. It’s not a good [money management] clue for lenders. Paying off an installment loan early just means you had the money to do it."

If you are looking for ways to increase your credit score, Experian Boost could give your FICO score a quick, painless bump to get you on your way into a higher range. It works by letting you link up your utilities, phone bills, and even subscriptions like Netflix to your Experian credit report, which could potentially have a positive impact on your score (if you've been making payments on time!). It is ~free~ and you might notice an instant score increase.

5. "Credit utilization doesn’t impact your credit score."

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True or false? Simply not true.

The facts: Your credit score isn't just about making on-time payments.

Your credit utilization — aka, the amount of credit you've used compared to the amount of credit you have available — is actually the second largest component to calculating a credit score. And, you can approximate it yourself by dividing your total balance by your total credit limit.

"Let's say you have two cards with a $1,000 limit for each," Droske hypothesized. "One of them has a $500 balance on it and the other has a $0 balance. In this case, your utilization is $500 divided by $2,000 — a 25% utilization. That's not bad. But if you close that card with a $0 balance, your utilization goes from 25% to 50%. Without even charging additional purchases, you can lower your score in this way."

6. "Closing a credit card will improve your credit score."

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True or false?100% false.

The facts: You should be careful about purposely closing a credit card. Part of the reason has to do with credit utilization. By closing a credit card, you lower your total available credit — which inevitably increases your credit utilization. "People have the mentality that if they don’t have credit cards, they can't do anything wrong — and if they don’t do anything wrong, then they won't have bad credit. If you close a credit card, then you’re eliminating those finance management clues," Droske said. "There is no score benefit to closing credit cards."

Sometimes, however, a card gets closed when it hasn't been used for a long period of time. So what can you do? Just use it to make a (small) purchase once or twice a year to keep the card active. "I have six credit cards and I keep five at home," Droske said. "I dust them off once a year to keep them active. I’ll go a buy Starbucks on one, a bottle of wine on another, lunch on another, and I pay them all off. Now they’re active for another year and I can just put them back in the drawer."

Of course, there may be some instances when it might make sense for you to close a credit card — like if you feel like your spending is out of control or your card has a hefty annual fee you can't afford anymore — but be aware that it could negatively impact your score.

7. "An authorized credit card user doesn’t affect your credit score."

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True or false? It can.

The facts: "An authorized user will appear on all credit reports," Droske said. "Their activity can help or hurt your score, like if they're late on payments or charge up the balance."

So the next question is, how will an authorized user affect your chances of approval for a hard inquiry? Really, it depends on the credit score model the lender is looking at. Some models calculate a score with authorized user activity in mind; others don't.

8. "It’s impossible to have a perfect credit score."

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True or false? Incorrect.

The facts: It's possible, but not necessary. When you already have a high credit score, there isn't much benefit to it being even higher. Plus, according to Droske — who had a perfect credit score for an entire year — it's actually really hard to obtain an 850 score.

9. "Your income affects your credit score."

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True or false? Wrong.

The facts: Your employment history doesn't affect your credit score, either. "Scoring models don’t know if you’re a surgeon or a cashier," Droske said. "Some of that info is just part of the identifying information on the credit report. They use this info to make sure they have the right person, but none of that is part of credit scores."

10. "Getting married will combine your credit scores."

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True or false? Nope.

The facts: When you get married, it may feel like you share everything with your spouse, but a credit score isn't one of those things. "Getting married doesn’t combine your credit obligations and therefore, it doesn’t combine your scores," Droske said. "However, a creditor may have the right to collect info from your spouse."

11. "Your credit score will be lower if you have large amounts of debt."

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True or false? It depends.

The facts: Mostly, it's relative to your credit limit and credit utilization. "If you have a $500 credit limit and you owe $498, that’s not a lot of debt, but it could severely impact your credit scores," Droske said. "You could also owe $10,000 in credit card debt but if your limit is $80,000, then it won’t impact your score as much."

12. "Asking for a credit limit increase will hurt your credit score."

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True or false? It's possible.

The facts: If your credit card company has to run a hard inquiry on your credit in order to see if you're qualified for an increase, then it could lower your score.

Many of us kinda just take the limit we're given — and nurse it for years and years. But we can ask for more. Fear of a slightly lower score isn't necessarily a reason to run from increasing your limit. According to Droske, "you always want to have the highest credit limits you can. If someone will give you $20K tomorrow, take it. You want to have the highest credit limits because it keeps your utilization low. You don’t want to do this all the time, but periodically. Even if there’s an inquiry that could impact your score a little, it won’t totally tank."

Of course, everyone's situation is different — the "right" credit limit for you could be too high or too low for someone else. You just have to take your personal circumstance into account when figuring out what credit limit would be appropriate.

13. "A bad credit score lasts forever."

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True or false? No.

The facts: A bad credit score isn't a permanent letter "F" on your report card that you can never take back. Over time, building better habits can help you improve a bad score. "Bad credit scores are not a life sentence, but you have to start doing the right things," Droske said. "You want to lessen the bad stuff, improve the good stuff, and educate yourself so you aren’t doing things that you think are the right. And, time heals things, too."

If this sounds like music to your ears (and bank account), check out more of our personal finance posts.