THE BLOG
11/06/2013 09:51 pm ET Updated Nov 11, 2013

3 Myths We Still Believe About Credit Scores

Credit scores are just one thing we can't seem to get right. In fact, a recent survey found that many of us are still confused about them. This confusion can have a significant impact on our financial future. A good credit score can save you a lot of money in the long run, but a poor score will cost you a pretty penny.

We can't bust all of the myths at once, but we can get a few of the most-often cited ones out of the way to start.

Myth #1: You have just one credit score.

This myth is one of the most difficult to bust. The reality is that you have dozens -- possibly hundreds -- of credit scores. In the popular FICO model alone, there are 49 different scores. And the score that you pay for usually isn't the one that your lender sees.

Credit scores can vary based on what type of inquiry is being made (auto lender vs. mortgage lender), what credit bureau data is being used (Equifax, Experian or TransUnion), and which model is being used (FICO, VantageScore, or some other model).

The good news is that your various credit scores are highly correlated, according to a recent report released by the Consumer Financial Protection Bureau (CFPB). That means if your credit is rated "good" in one model, it should be "good" in all models.

Myth #2: Checking your own credit hurts your score.

When you request copies of your credit report from AnnualCreditReport.com or get your free credit score on a site like Credit Karma, a credit request is being made on your behalf. This is called a soft inquiry, and it won't affect your credit at all. A soft inquiry is not used for making lending decisions -- that kind is called a hard inquiry.

Checking your credit score and reports regularly is actually a good thing. It gives you an idea of where you stand and how your actions are affecting your credit rating. Plus, you can check your credit reports for inaccuracy and errors. So don't be afraid to check up on your credit health often -- it won't hurt your score one bit.

Myth #3: Closing your oldest credit card will hurt your score.

It's been a long-held belief by many that closing your oldest credit card account will somehow remove that card's history from your credit report and shorten your overall credit age. That's (thankfully!) not true. Accounts, whether open or closed, remain on your credit report.

Closed accounts in particular remain on your credit report and continue to age just like any other account. However, credit bureaus will remove them from your reports after ten years, so you won't get the benefit of a long, on-time payment history of a closed account forever.

But there's another factor that makes this myth sometimes true. If your oldest credit card account has a large limit, it could be greatly contributing to one of the most important factors of your credit score: your credit card utilization rate. This rate is your total credit card balances divided by your total credit card limits. It generally indicates how much you rely on credit. Closing an account with a high limit could inflate your credit card utilization.

Before you decide to close a credit card account, make sure your other credit card balances are low enough to compensate. But don't stress over losing your good history on that card -- it'll take about a decade for that to happen.

Check out this infographic that busts a few more common credit myths:

credit myths debunked infographic

What credit myths do you want to see busted?

Bethy Hardeman writes on credit, personal finance and the economy for CreditKarma.com, a free credit management website that helps more than 10 million people access their credit score for free. Find her on and Twitter.

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BEFORE YOU GO
Top 8 Financial Worries Of Americans
PHOTO GALLERY
Top 8 Financial Worries Of Americans