Credit Sesame lists 20 points of credit fiction and gives you the facts about credit and credit management.

1. FICTION: Checking your own credit score frequently lowers it.

FACT: Checking your credit score is considered a “soft inquiry” and does not impact your score.

When you check your own credit score, it is classified as a “soft pull,” which does not affect your credit. Soft inquiries include checking your score through free services or when a potential employer reviews your credit. In contrast, a “hard inquiry,” such as applying for a credit card or loan, can temporarily lower your score. Keeping an eye on your credit report is a good financial habit.

2. FICTION: You have one credit score.

FACT: You have multiple credit scores, even if most people refer to their “credit score” (singular).

Different credit bureaus (Equifax, Experian, TransUnion) calculate scores based on slightly different information. Each bureau collects data independently, so you have several credit scores depending on which report is pulled. Additionally, different scoring models, like FICO and VantageScore, may weigh factors differently. For example, FICO scores are the most commonly used in lending decisions, while VantageScore is also widely available for consumers.

3. FICTION: Closing a credit card improves your credit score.

FACT: Closing a credit card can hurt your score by reducing your available credit and altering your credit utilization ratio.

When you close a credit card, you decrease the total amount of available credit, which can increase your credit utilization ratio (the amount of credit you use compared to your total credit limit). A higher ratio negatively impacts your score. It is often better to keep older accounts open (even if you do not use them) to maintain a longer credit history and more available credit.

4. FICTION: You must carry a balance on your credit card to build credit.

FACT: You can build credit by using your card and paying it off in full each month. There is no need to carry debt.

Carrying a balance unnecessarily leads to interest charges. Lenders want to see responsible credit usage, which means charging small amounts and paying the balance in full each month. This demonstrates that you can manage credit without falling into debt, and it helps your credit score without costing you money in interest.

5. FICTION: Paying a bill late just once does not affect your credit score.

FACT: Even one late payment can drop your credit score significantly, especially if it is 30+ days late.

Payment history makes up 35% of your credit score, so paying bills on time is crucial. A payment that is just a few days late may not get reported to the credit bureaus, but once it is 30 days late or more, it will likely be reported and can cause your score to drop by 90–110 points. One way to avoid this is to set up automatic payments or reminders.

6. FICTION: A higher income means you automatically have a better credit score.

FACT: Your credit score is based on your financial habits, not your income level. You can have a high income and a low credit score, or vice versa.

Your credit score is determined by factors such as payment history, credit utilization, and the length of your credit history. A higher income may help you manage credit better, but it does not directly influence your credit score. Someone with a modest income can have excellent credit if they manage debt responsibly, while a high earner could have poor credit if they frequently miss payments.

7. FICTION: Marrying someone with bad credit lowers your credit score.

FACT: Your credit scores remain separate even after marriage. However, joint accounts or co-signing can affect your credit if not managed responsibly.

Your credit reports and scores are yours alone. However, if you open joint credit accounts or co-sign for loans together, both your credit histories are linked to that account. If your partner misses payments or runs up high balances on joint accounts, it could affect both of your credit scores. Communication and shared financial responsibility are key to keeping both scores healthy.

8. FICTION: You must always pay to check your credit score.

FACT: Many services now offer free access to your credit score.

Some companies charge for credit scores, but you can access your TransUnion VantageScore 3.0 score for free through Credit Sesame. Many banks and credit card issuers offer free credit score monitoring to their customers. Additionally, websites like Credit Sesame provide free access to your credit score, making it easier to keep track of your financial health without paying extra.

9. FICTION: Maxing out your credit card is fine as long as you pay it off each month.

FACT: Maxing out your card, even temporarily, can hurt your credit utilization ratio, which impacts your score.

Credit utilization is the second biggest factor in your credit score after payment history. Anything above 30% of your total credit limit can lower your score, even if you pay off the balance at the end of the month. To protect your score, aim to use only a portion of your available credit.

10. FICTION: Once a debt is paid off, it disappears from your credit report.

FACT: Paid-off debts can stay on your credit report for up to 7 years, but they show as “paid,” which is better than leaving them unpaid.

Even after paying off a debt, the history of the account stays on your credit report for several years. However, paid-off debts are seen positively compared to unpaid or delinquent accounts. Over time, the impact of past negative information fades, but paying debts is always a good move.

11. FICTION: All credit scores range from 0 to 900.

FACT: Most credit scores, like FICO and VantageScore, range from 300 to 850.

The most commonly used credit scoring models, FICO and VantageScore, both range from 300 (poor) to 850 (excellent). Some specialized credit scores may have different ranges, but 850 is the highest achievable score for most consumers.

12. FICTION: You do not need to worry about your credit score until you want a loan.

FACT: Your credit score affects more than just loans. It can impact renting an apartment, insurance rates, and even some job opportunities.

Landlords, insurers, and even some employers use your credit score as a factor in decision-making. A higher credit score can help you secure better rental agreements, lower insurance premiums, and, in some cases, make you more attractive to potential employers in certain industries.

13. FICTION: Once you have bad credit, you are stuck with it

FACT: Bad credit can be improved with time, responsible credit use, and paying off debts.

Credit scores can recover from past mistakes by consistently making on-time payments, reducing overall debt, and avoiding new hard inquiries. It may take time, but practicing good credit habits leads to gradual improvements.

14. FICTION: Having too many credit cards hurts your score.

FACT: It is not about how many credit cards you have but how you manage them. Keeping balances low and paying on time is what matters most.

Having multiple credit cards doe not negatively affect your score as long as you keep your credit utilization low and make timely payments. In fact, having available credit and using it responsibly can boost your credit score by demonstrating strong credit management.

15. FICTION: Your credit score should be perfect if you have never been in debt.

FACT: No debt means no credit history. Lenders want to see that you have managed credit responsibly over time to build a strong score.

Credit scores are built through the responsible use of credit. Without any debt or credit accounts, there is no credit history to evaluate, which makes it harder for lenders to assess your creditworthiness. A mix of credit types (like credit cards, loans, etc.) used wisely is key to building good credit.

16. FICTION: Using a debit card builds your credit.

FACT: Debit card use does not affect your credit score because it is not a form of borrowing. Only credit-related accounts are reported to credit bureaus.

Debit card transactions are tied directly to your checking account and do not involve borrowing money, so they do not get reported to credit bureaus. To build credit, you must use credit products like credit cards or loans, demonstrating your ability to manage borrowed money.

17. FICTION: A good credit score stays good forever.

FACT: Credit scores can change depending on your financial behavior.

Your credit score is dynamic and can change depending on your credit usage and payment history. Regular good financial behavior (like paying bills on time and keeping balances low) is necessary to maintain a good score. Late payments, high credit utilization, and taking on too much new debt can cause your score to drop, so it is essential to keep practicing good credit habits.

18. FICTION: You cannot get a loan with no credit history.

FACT: It is harder, but options like secured credit cards or loans are designed to help you build credit from scratch.

If you do not have a credit history, you can start building it with secured credit cards or credit-builder loans specifically designed for people new to credit. These tools can help you establish credit and improve your score over time.

19. FICTION: Credit bureaus decide if you get approved for loans.

FACT: Credit bureaus only provide the data (your credit report and score). Lenders use this information, but they ultimately decide if you are approved.

Credit bureaus collect and provide information about your credit history but do not make lending decisions. Lenders analyze the information in your credit report, along with other factors like income and employment, to decide whether to approve your loan or credit application.

20. FICTION: Bankruptcy completely erases all your debt and resets your credit score.

FACT: Bankruptcy can discharge many debts but damages your credit score for up to 10 years.

Bankruptcy can provide relief from many types of debt, but it does not wipe out everything. Certain debts, such as student loans, child support, and tax obligations, typically survive bankruptcy. Additionally, the negative impact on your credit score can last up to 10 years, making it harder to get new credit.

Understanding credit fiction vs fact is crucial for managing your financial health effectively. Knowing the truth means you can make informed decisions about your credit and avoid costly mistakes. Recognizing these myths helps you navigate the world of credit with greater confidence and clarity. A firm grasp of credit and credit score can help you maintain a strong credit profile and achieve your financial goals.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

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