Your credit score can be something of an enigma. Credit scoring companies like FICO and VantageScore share approximations of how your credit score is calculated. But there are so many factors it can be hard to predict exactly how your actions affect your score.
What’s more, there can be confusion about who can get access to your credit score and how that affects your credit.
Despite all this, there are some things you may hear about credit scores that just aren’t true. It’s hard to say where these myths get started, says Bruce McClary, vice president of communications at the National Foundation for Credit Counseling. So, it’s important to get your facts from trusted sources like MyFICO.com or the three national credit bureaus.
To resolve some of your concerns about your score, read on to learn about which credit score myths you can stop believing.
5 credit score myths
Knowing these myths’ true nature can put you at ease and help you build better credit.
1. Carrying a balance on your credit cards helps your score
Using credit is one of the primary requirements for building a good credit history. It’s a sign to lenders that you can borrow responsibly. That doesn’t mean you have to keep a balance on your credit card and pay interest each month.
Lenders typically report your credit card balance to the credit bureaus once a month, often on the day the statement for the month closes. This means that if you pay off your balance in full by the due date – which we highly recommend – your credit report will still show a balance for the month.
Also, your credit report doesn’t even list whether you paid off your balance in full or not each month. It simply shows the latest reported balance and whether you’ve been making on-time payments. So, the idea that keeping part of your balance each month helps your score is false.
2. Prospective employers check your credit score when you apply
When you apply for a job, part of the process may include a background check – also called a consumer report. Depending on the job, this check may include your credit report. But the prospective employer may not view your actual credit score.
Keep in mind that, according to the Fair Credit Reporting Act, the employer must get your permission before requesting a copy of your consumer report. And if they choose not to hire you because of information found in it, they must give you a copy of the report.
3. Checking your score hurts your credit
Whether you’re building or maintaining your credit history, checking your score often is a good way to stay on track. But some people fear that checking their credit hurts it.
Fortunately, that’s not the case. When you check your credit score, credit bureaus consider that a “soft” inquiry, which doesn’t affect your credit at all. “Hard” inquiries, which usually happen when you apply for credit, can knock off a few points. They’re not devastating, though.
“New credit makes up 10% of your overall score,” McClary says. “While a lot of inquiries over a short period of time could lead to a noticeable decline in a credit score, the impact is minimal compared to other activity related to creditor payments and balances owed.”
4. Rent and utilities help build credit
Not every monthly payment you make boosts your credit score. Because rent and utilities aren’t considered credit – unless you’re delinquent on payments, that is – they typically don’t do anything for your credit score.
Of course, some exceptions do apply. Rental Kharma works with your landlord to report your rent payments to TransUnion. Unfortunately, this doesn’t help you if a lender reviews only the reports from the other credit bureaus. You’ll also pay a monthly fee for the service, and your landlord must be willing to participate.
5. All credit scores are the same
Where credit scores get complicated are in their diversity. FICO is the most widely used credit score. But there several credit reporting companies that use alternative scores, including VantageScore, NextGen Score, PLUS Score and more.
Each of these “FAKO” scores differs in how it weighs credit factors. Even among FICO scoring models, your score may be different than what the lender sees. This is because there are several models of the FICO score. The score is also dependent on the information each of the three credit bureaus provides.
When checking your credit score, know that viewing a FAKO score isn’t necessarily a bad thing. It can usually give you a ballpark figure of where your FICO score sits.
To make sure you’re on top of your credit at all times, consider signing up for a credit reporting service like Credit Karma. Then, focus on the areas of your credit report that need work so you can work to boost your score.
Next, find more ways to learn about credit scores from trusted sources like FICO and the credit bureaus. The more you know, the better you’ll be able to improve or maintain your score.
Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.