Debunking myths about credit scores

Vincenza Vicari-Bentley, AFC
USU Extension Empowering Financial Wellness Program Coordinator

​Money Myths- how do they even start? Did you hear it from a friend who heard it from a friend? Maybe a family member or a co-worker? Wherever we get these myths, it seems that we often accept myths about personal finances as truth (especially when we hear the same thing over and over again). This can be especially true when it comes to personal finances because a lot of people don’t have a ton of knowledge about that topic and it is one of those topics that can be intimidating to a lot of people. Given the complexity of credit scores and how they are calculated, it’s easy to see why so many myths about them exist. I’m here to break down 3 common myths about credit scores. 

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Myth #1 - Checking your own credit report will lower your score. Checking your credit is considered a “soft” pull which is NOT used as a factor in calculating your credit score. However, if you apply for credit and give a creditor/lender permission to pull your credit to determine if you qualify for a loan or credit card then that is considered a “hard” pull and then yes, that will affect your credit score (hard inquiries count towards 10% of your overall FICO score). So don’t be afraid to pull your own credit report! It’s all good.
 
Myth #2 - Closing old or inactive accounts can help boost your credit score. Closing old accounts that you have a long, good payment history on your credit could actually hurt your credit score. This is because you are eliminating all the history of an account that was in good standing.  Credit history accounts for 15% of your FICO credit score.
 
Myth #3 - You have just one credit score. Your credit score is based on the credit report that was used to determine the score and the scoring model used. We can get credit reports from three different major credit reporting agencies (Equifax, TransUnion and Experian). Some lenders and creditors report to all three agencies some will report to just one. While most of the information on your three credit reports will be the same, there could be some differences. So what that means is that your credit scores, based on these three reports, can be different as well.
 
Everyone should check their credit scores (and reports) throughout the year. At a minimum you should check it at least once a year. It’s especially important to keep a watch for fraud or identity theft. Monitoring your credit score regularly also reassures you that you’re managing your credit well.