Six Credit Score Myths That You Should Be Aware Of

A credit score is a critical part of a person’s financial life. Having an appreciable credit score entails numerous benefits.

Unfortunately, several misconceptions and lots of misinformation about maintaining an impeccable credit score. This article will explore a few of them. But before that, what exactly is a “credit score”?

What is a Credit Score?

A credit report generated by a financial institution will provide you with a credit score ranging between 300 to 850 based on the transactions made and the money borrowed. The credit score will ultimately determine whether the lender will permit you to borrow the money or not.

A credit score above 600 will reflect well on the borrower’s reliability and credibility. It will also endow the borrowers with some perks, like allowing for a longer repayment period, and lower interest rates. However, any score under 600 will impose certain restrictions on the borrower, a few of which include,

  • Stricter conditions will be levied on the borrower with a lower credit score compared to others.
  • Significant interest rates will be applied on the borrowed loan, although the interest rates might differ from institute to institute.
  • The borrower will not have the liberty to request a larger sum of money, and the repayment period will be shorter and stricter.

It stresses the importance of maintaining a good credit score, as it may come in handy when the borrower needs a significant sum of money.

What is a Credit Score

The criteria taken into account while generating a credit score are,

  • History of payment: This will help determine the credibility of the borrowers as it contains a record of all their past payments and transactions. A credit record with on-time payments will generate a good credit score, while delayed payments will be counterproductive.
  • Credit utilisation: It is imperative to maintain a balanced utilisation of credit. Going overboard with it, or not using it at all will only reflect poorly on your credit record.
  • Length or duration of usage of that credit card: The longer utilisation of credit, will reflect positively and, will help in building credit.
  • The credit mix should account for at least 10%

But over the years, there have been several myths that have taken over people’s perceptions of the financial markets. They serve to be extremely misleading to new borrowers who don’t understand its dynamics.

Rather than blindly swinging by others’ suggestions, it’s always best to clarify them with your partner bank or any other financial institution.

Here are some myths associated with credit scores:

Myth 1: Not Borrowing Loans Will Boost the Credit Score!

One of the most well-known ways to build a credit score is by showing that the borrower can repay the loan amount within the stipulated deadline. Hence, borrowing loans or already having credit cards will neither affect the credit score in any way nor add a negative mark in their credit record. Making timely repayments for the borrowed loan will add to your credibility as a borrower and will also reflect on your credit record.

Borrowers can avail of small business loans, as they have little to no interest, making timely payments easier. This can be a great way to increase your credit scores.

Myth 2: Job Income Will Affect the Credit Score

Your credit score is completely based on your transactions, i.e., the money borrowed and the money repaid. A high income won’t boost your credit score. Indirectly,, however, a higher income makes it easier to repay an instalment on time, which can improve your credit score if done consistently.

Your annual income will thus not have any effect on your credit score whatsoever.

Myth 3: Closing Previous Credit Cards Will Help

This is one of the most common myths that people fall for. It’s thought that closing old credit card accounts only reduces your credit score a little. However, the repercussions go beyond a simple decline in your credit score.

Closing old accounts can even reduce the amount of credit available to the borrower, simply because their overall utilisation also reduces. While you shouldn’t over-utilise your credit cards, keeping old accounts active shows that you can manage multiple credit sources and still make timely payments on them.

It’s recommended that the borrowers maintain a credit utilisation rate of around 30% for the best credit score gains.

Myth 4: There Is Only One Credit Score

Most inexperienced borrowers are easily misguided into believing that there is only one type of credit score available. However, this is far from true.

The financial market is constituted by various lenders, each of whom uses different credit scores. There are three versions of credit scores primarily available, which include:

  • Equifax
  • Experian and
  • TransUnion.

Keep in mind that the credit scores determined by each of these might not be the same, but will nevertheless provide a fuller picture of your money-management skills.

Myth 5: Self-Checking Credit Reports will Lower Your Credit Score

Checking your credit reports won’t harm your credit score in any way. In fact, keeping track of your report is a great way to keep an eye out for any anomalies, while also focussing on the goal of increasing your credit score.

It is recommended that the borrowers regularly check their credit reports to get a clear picture of where they stand, while also checking for any fraudulent payments made from their accounts.

On the contrary, multiple requests by lenders to view an applicant’s credit report can impact their credit score.

Myth 6: Debit Cards Help in Building A Good Credit Score

Any purchases made through debit cards will not be included in the credit record because the credit record will only consider transactions made through money credited to you by financial institutions. Debit card payments are merely a reflection of you spend your own money, which doesn’t quality as a measure of your creditworthiness.

Hence, debit card transactions can never be used to build credit, and no credit bureau will accept the debit transactions while generating your credit score.


We hope this article helped clear the air about the myths surrounding credit scores. You must avoid paying heed to such misleading ideas, as they could hamper your efforts towards building a strong credit profile. Always rely on information from credit authorities and financial institutions to be on the safe side.

Also Read: Paypal For Android: How To Make And Receive Payments From Your Mobile Device

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