5 Common Credit Score Myths That Hurt People Every Year

5 Common Credit Score Myths That Hurt People Every Year It’s how we make money. But our editorial integrity ensures that our product ratings are not influenced by compensation. Image source: Getty Images Credit scores are weird. You can do the "right thing" and still watch your score drop. For example, a friend of mine paid off her mortgage early and closed her old credit cards to clean things up -- and her score went down . Strange, right? Believing the wrong stuff about credit scores can really screw you up. Here are five credit myths that mess people up every single year, and what you actually need to know. 1. Closing old credit cards helps your score This one feels logical -- but it's usually wrong. That's because of these two major factors that affect your credit score: Length of credit history (older is better) Credit utilization ratio (lower is better) When you close an old credit card, you lose that long account history and reduce your total available credit. That means you might end up using a bigger percentage of your remaining credit, which can bring your score down. Pro tip: If you're not using an old card, keep it open and make a small purchase every few months. If the card has an annual fee, try calling the issuer to downgrade to a no-fee version instead. Want to start building credit the smart way? Check out these top-rated credit cards with rewards and no annual fee. 2. Carrying a balance improves your credit score This myth drives me nuts. Carrying a balance doesn't help your score -- it only means you're paying interest for no reason. Using credit cards responsibly (paying off your full balance each month) is the smarter move. You'll avoid interest and build solid credit history at the same time. What matters more with regular usage is your credit utilization ratio, which is how much of your total available credit you're using. This accounts for about 30% of your FICO® Score, and keeping it under 30% (or ideally under 10%) can make a big difference. 3. Checking your score will lower it This one's actually partially true, but only in specific cases. Soft inquiries , like checking your own credit or getting prequalified for a card, won't affect your score at all. Hard inquiries , like applying for a credit card or loan, can knock a few points off temporarily. So yes, applying for multiple cards or loans in a short window can ding your score a bit. But checking your own score, that's actually a smart move. In fact, most rewards credit cards and bank apps offer free monitoring tools -- and I check mine every month. 4. All credit cards are bad news Used recklessly -- yes, credit cards can be dangerous. People who have spending issues or shopping addictions can get into serious financial trouble. But used the right way, they're a tool. And a pretty powerful one. As long as...

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