Your credit score is one of the most important numbers in your financial life, yet misconceptions about how it works can lead to costly mistakes. Many people believe myths that can either harm their score or stop them from making smart financial moves.
Let’s break down the most common credit score myths so you can make informed financial decisions.
1. Checking Your Credit Score Lowers It
Myth: Checking your credit score will hurt your score.
Truth: Checking your own credit score is a soft inquiry, which has no impact on your score.
A hard inquiry, on the other hand, happens when a lender checks your credit for loans, credit cards, or mortgages. Too many hard inquiries in a short period can lower your score.
Tip: You can check your credit score for free on platforms like CIBIL, Experian, or Equifax without affecting it.
2. You Need to Have Debt to Build a Credit Score
Myth: You must carry debt to have a good credit score.
Truth: You don’t need to be in debt—you just need active credit accounts.
Using a credit card responsibly (paying bills on time and keeping your credit utilization low) helps you build a good score without carrying debt.
Tip: Even if you pay off your credit card in full each month, you’re still building credit.
3. Closing Old Credit Cards Improves Your Score
Myth: Closing an old or unused credit card will boost your credit score.
Truth: Closing old credit accounts can actually hurt your score!
When you close a card, you reduce your available credit limit, which increases your credit utilization ratio (how much credit you’re using vs. your limit). A higher ratio can lower your score.
Tip: Keep older credit accounts open if possible, even if you rarely use them. They help with credit history length and credit utilization.
4. Paying Off a Loan Immediately Improves Your Score
Myth: Paying off a loan early gives you an instant credit score boost.
Truth: While paying off a loan is financially smart, it won’t necessarily increase your score immediately.
Your score benefits from a mix of credit types, including both active credit cards and loans. If you pay off a loan and don’t have other types of credit, your score could drop slightly due to the reduced credit mix.
Tip: Instead of paying off a loan too early, consider making consistent on-time payments to build a stronger credit history.
5. Your Salary Affects Your Credit Score
Myth: A higher salary means a higher credit score.
Truth: Your income is not a factor in your credit score.
Credit scores are based on:
✔️ Payment history (35%) – Paying bills on time.
✔️ Credit utilization (30%) – How much of your credit limit you use.
✔️ Credit history length (15%) – How long you’ve had credit accounts.
✔️ Credit mix (10%) – A variety of credit accounts (loans, credit cards).
✔️ New credit inquiries (10%) – How often you apply for new credit.
Tip: Even if you earn a high salary, missing payments or maxing out your credit cards can lower your score.
6. Credit Scores Are the Same Everywhere
Myth: You have only one credit score.
Truth: You have multiple credit scores, depending on the credit bureau (CIBIL, Experian, Equifax, etc.).
Lenders use different scoring models, so your score might vary slightly between reports. However, they generally follow the same trends—if one score is high, the others will likely be similar.
Tip: Check your credit reports from different bureaus to get a complete picture of your credit health.
7. You Can’t Get a Loan with a Bad Credit Score
Myth: A bad credit score means you’ll never get approved for a loan.
Truth: While a low credit score can make borrowing harder, it doesn’t make it impossible.
Many lenders offer credit-builder loans, secured credit cards, or high-interest personal loans to people with low scores. However, you may have to pay higher interest rates.
Tip: If you have a bad credit score, improve it by making on-time payments, reducing debt, and keeping old credit accounts open.
8. Using Your Full Credit Limit is Fine if You Pay on Time
Myth: Maxing out your credit card every month is okay if you pay it off in full.
Truth: Using too much of your credit limit can hurt your credit utilization ratio, which impacts your score.
Ideally, you should keep your credit utilization below 30% of your total limit. For example, if you have a credit limit of ₹1,00,000, try to use no more than ₹30,000 at a time.
Tip: If you frequently spend close to your limit, request a higher credit limit or pay your balance early.
9. Credit Repair Agencies Can Instantly Fix Your Score
Myth: Paying a credit repair company can quickly boost your score.
Truth: No agency can magically erase negative marks overnight.
While legitimate credit repair agencies can dispute errors on your credit report, they cannot remove accurate negative information (such as late payments or defaults).
Tip: Instead of paying for credit repair services, focus on paying bills on time, reducing debt, and checking your credit report for mistakes.
10. You Don’t Need a Credit Score if You Don’t Use Credit
Myth: If you don’t take loans or credit cards, you don’t need a credit score.
Truth: Having no credit history can make it difficult to get loans, rent a house, or even secure a job.
Even if you don’t borrow money often, having a good credit score helps with:
✔️ Getting approved for home loans and car loans
✔️ Qualifying for lower interest rates
✔️ Getting better rental and job opportunities
Tip: If you don’t have credit, start with a secured credit card or a low-limit credit card to build your score.
Take Control of Your Credit Score
Understanding credit score myths helps you make better financial decisions. Your credit score is a powerful tool, and managing it wisely can save you money, stress, and financial headaches.
Key Takeaways:
✔️ Check your credit score regularly – It won’t hurt your score.
✔️ Keep credit utilization below 30% – Don’t max out your cards.
✔️ Pay bills on time – This has the biggest impact on your score.
✔️ Keep old credit accounts open – It helps with credit history.
✔️ Avoid multiple loan applications at once – Too many inquiries can hurt your score.
By avoiding these myths and following smart credit habits, you can build and maintain a strong credit score for a financially secure future.
