Don’t Believe the Hype: Debunking Your Credit Score Myths

Overview

If you are new to the world of credit, you have probably heard countless bits of confusing advice about your credit score. Many people believe credit scores are fixed, mysterious, or easily broken. Your credit score is actually a direct reflection of your borrowing habits, and separating myth from fact is the key to building a healthy financial future.

Here is the truth behind the most common credit score misconceptions.

The Big Lies, Simplified

Myth 1: Checking your own score lowers it.
Truth: This is the biggest lie. When you check your own score, it is a soft inquiry and has absolutely no impact on your score. Check it as often as you like to stay informed. Only a lender’s check during an application can cause a small dip.

Myth 2: Closing an old credit card helps my score.
Truth: This hurts your score. When you close an old card, you shorten your credit history length and reduce your total available credit. Both actions can negatively affect your score, especially by increasing your credit utilisation ratio. Keep old, unused cards open.

Myth 3: You must carry a balance to build credit.
Truth: False you only need to make on-time payments. Carrying a balance simply means you pay interest. The smartest move is to pay your balance in full every single month.

Myth 4: One late payment won’t affect my score.
Truth: Even a single missed or late payment can negatively impact your credit score because your payment history is the largest factor in its calculation. Be consistent with every EMI and credit card bill.

Myth 5: Income is part of my credit score.
Truth: Your income, salary, or job details are not included in the credit score calculation. While lenders use your income to decide if you can afford a loan, the score itself is based purely on your borrowing behavior.

Myth 6: Paying off a loan immediately boosts my score dramatically.
Truth: While paying off debt is a great financial move, the score boost may not be immediate or huge. Sometimes, closing a loan can even cause a slight temporary dip due to a change in your credit mix. It is a win for your wallet, but not an instant magic trick for your score.

Myth 7: I only have one credit score.
Truth: You have slightly different scores. Various credit bureaus (like CRIF, CIBIL, etc.) use slightly different models, so your score may vary by a few points across platforms. They all reflect the same underlying financial health, so do not worry about minor variations.

Your Financial Final Word

Your credit score is not permanent or unchangeable; it is dynamic. Consistent, responsible habits will steadily raise your score over time. Focus on making timely payments and keeping your credit balances low, and you will be well on your way to a healthy financial future. Stop getting financial advice from rumors and old wives’ tales. Focus on the facts, and remember that control over your credit starts with checking your score today.