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7 Myths About Credit Scores

7 Myths About Credit Scores

A credit score is vital information, and everybody needs to understand how it works. There are a lot of misconceptions people hold about their credit scores, some of which can harm their score. Here, we’ll list some of the most common myths about credit scores and the truth about them:

1. Your income impacts your credit score.

Income is one of the factors that lenders consider to check your repayment capacity when you apply for a loan or credit card. Your income, however, is not part of your credit report. This means what you earn does not affect your credit score.

2. Checking your credit score often hurts your score.

No, it doesn’t. When you check your credit score, it gets registered as a soft enquiry, which does not have the potential to affect your credit score. This means you can check your credit score as many times you want without hurting your credit score.

3. Applying for new credit cards does not hurt your credit score.

When you apply for a new credit card or a loan, your potential lender will pull up your credit report to check your creditworthiness. This is registered as a hard enquiry on your credit report,and it has the potential to hurt your credit score, especially if you apply for too many credits, and there are too many hard enquiries on your credit report.

4. Closing your old credit cards help increase your credit score.

In fact, closing your credit card lowers your credit score. How? When you close an old credit card account, you decrease your available credit limit. This increases your credit utilization ratio. A high credit utilization ratio is bad for your credit score.

5. Carrying a balance on your credit card helps boost your credit score.

False. On the contrary, carrying a balance has the potential to hurt your credit score. Carrying a balance is bad for you in a number of ways:

  • It can increase your credit utilization ratio
  • The balance can get out of control due to its high-interest rate and finance charges
  • You can easily default due to the potential risk of falling in debt

6. You will never be approved for any type of credit if you have a bad credit score.

If you have a bad credit score, it’s difficult to get approved. Fortunately, it’s not the only factor lenders consider when determining your creditworthiness. There are other factors, such as income, repayment capacity, etc. that play an important role in the loan approval process. This means, even if you have a bad credit score, you may get approved, but you may have to settle for a high-interest rate or pledge a collateral.

7. There is one credit score for each person.

There are several different credit bureaus, each having different scoring models. This means each person may have different credit scores for each of the credit bureaus. The CIBIL score is the most popular credit score in India.

Now what?

This list of myths might have opened you to some truths of credit scores. If you are looking for some tips to boost your credit score, here they are:

  • always pay your bills on time
  • try to pay off your debt or keep the outstanding balances low
  • don’t close old credit cards
  • check your credit score regularly, and report inaccurate information or errors
  • don’t apply for too much new credit, too often
Shiv Nanda

Shiv Nanda

Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India's first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life's mission to help and educate people on various financial topics, so email him your questions at

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