02/20/2013 05:36 pm ET

Top Myths That Keep People From High Credit Scores

"Folk wisdom" is the collection of useful pieces of knowledge that get passed around verbally or passed down from one generation to the next. It's usually cute and memorable -- things like "an apple a day keeps the doctor away." Unfortunately, not all folk wisdom is correct or even helpful.

The same is true of credit. There are a lot of ideas and myths about good credit and higher credit scores but they aren't all true or helpful. As a result, many people know the importance of high credit scores but they aren't necessarily achieving that goal.

Here are three myths that you might believe (along with the truth):

1. The fewer credit cards the better. Unfortunately, too many people believe that a lack of credit cards -- or any kind of credit at all -- leads to better credit. But that is not true. We don't start out with perfect credit and then "lose points" through credit cards and poor choices. Rather, our credit score is derived from our credit history so the longer and more careful your credit history is, the better. Therefore, you need credit cards (at least one and perhaps even 2 or 3) that are well-managed and paid on time. All else being equal, showing that you can responsibly use credit cards will usually give you a higher score than not having any credit cards at all!

2. You need to pay off your credit cards completely each month if you want to improve your credit score. This myth is only partially true. Having credit cards that are USED each month and PAID OFF in full each month is very good. But that's not always realistic for most of us. Life is busy and there are always plenty of things we need to spend our credit to purchase. So if you can't use and pay off your credit card each month then the next best thing is to use each of your credit cards and pay them down to 20 percent of the high credit limit... and to make sure you make at least the minimum payment by the due date. Of course you'll be paying interest on that outstanding amount but it will have less impact on your credit score than if your statement was higher or if your payment was late.

3. Your credit score is made up of your credit cards, loans, and mortgages. This is another piece of folk wisdom that is only partially true. It's true that these types of credits do indeed influence your credit score. However, many people are surprised to learn that some utility companies are now reporting to the credit reporting agencies who calculate your credit score. Therefore, keeping your utilities current is critical to help you keep your credit score as good as it can be.

The most important thing? Educate yourself! The more you know about credit and credit scores, the more effective you can be at taking action to improve your score.