Things About Credit Scores Most People Get Wrong

This myth stops a lot of people from monitoring their own credit — which is exactly the wrong move. There are two types of credit inquiries: soft and hard. A soft inquiry happens when you check your score, or when a lender pre-screens you for an offer. A hard inquiry happens when you formally apply for new credit. Only hard inquiries affect your score, and even then, the impact is usually small and temporary. Checking your own report regularly is one of the best ways to catch errors early. For guidance on fixing mistakes, see how to dispute a credit report error.

Two key factors in your credit score are your credit utilization ratio — how much of your available credit you're using — and the average age of your accounts. When you close an old card, you lose that card's credit limit, which instantly raises your utilization ratio if you carry any balances elsewhere. You also reduce the average age of your open accounts over time. Neither outcome helps your score. If a card has no annual fee, keeping it open and occasionally using it for a small purchase is generally the smarter move. Learn more about the five factors that shape your credit score.

This myth likely started as a misunderstanding of how credit utilization works. Lenders do want to see that you use credit, but they don't need you to carry a balance to confirm that. What matters is that activity is reported to the bureaus — and even paying in full each month shows up as active, responsible use. Carrying a balance only benefits your card issuer by generating interest charges. There is no scoring benefit to paying interest on purpose.

Payment history is the single largest component of most credit scores, typically accounting for around 35% of your score. A payment that's 30 or more days late gets reported to the credit bureaus and can drop your score by a meaningful amount, even if everything else on your report is clean. The higher your score going in, the more dramatic the drop can be. The negative mark doesn't simply fade — it can remain on your report for up to seven years. Setting up autopay for at least the minimum due is one of the simplest ways to protect yourself. Habits that quietly damage credit over time are worth understanding too.

FICO alone has dozens of scoring models, and VantageScore is another widely used system. Different lenders use different versions depending on the type of credit you're applying for — an auto lender may pull a version optimized for car loans, while a mortgage lender uses yet another. The score shown in your banking app or a free monitoring service is often a consumer-facing version that won't match exactly. This doesn't mean those scores aren't useful — they reflect the same underlying data — but don't be surprised if the number a lender sees is slightly different. For more on how auto financing intersects with credit scores, see myths about credit scores and car financing.