The Top 10 Credit Score Myths You Need to Stop Believing in 2025

Your credit score has quietly become one of the most powerful numbers in your life, but many still fall for credit score myths in 2025. This can lead to costly financial mistakes. This three-digit summary of your financial history influences everything from the interest rate on your car loan and the approval of your mortgage application to your insurance premiums and even your ability to rent an apartment.

Yet, for something so critical, the world of credit is shrouded in mystery, half-truths, and outright myths. This misinformation can be costly, leading people to make poor financial decisions based on bad advice passed down through generations. In the financial landscape 2025, with new scoring models and ever-evolving financial products, understanding the truth is more critical than ever.

It’s time to turn on the lights. This guide will definitively debunk the 10 most common and damaging credit score myths, giving you the clarity you need to take control of your score and build a stronger financial future.

Myth #1: Checking Your Score Lowers It

The Reality: This is, without a doubt, the most pervasive myth, entirely false. The fear that simply looking at your score will harm it prevents millions from engaging with their financial health.

The confusion comes from a misunderstanding between two types of credit inquiries:

• Soft Inquiry (or Soft Pull): When you check your credit score through a free monitoring app, bank, or a credit bureau’s website, it is a “soft inquiry.” This is like looking at your report card. It is invisible to lenders and has zero impact on your credit score. You can check it every day if you want.
• Hard Inquiry (or Hard Pull) occurs only when you formally apply for new credit, like a loan or credit card. The lender pulls your score to make a lending decision. A hard inquiry does appear on your report and can temporarily lower your score by a few points.

The Takeaway: Regularly monitoring your score is safe and one of the most important financial habits you can adopt. It’s your number one defense against identity theft and the best way to track your progress. While hard inquiries are necessary when applying for new credit, you can take steps to minimize their impact. Use Beem to monitor your credit inquiries and get notified of any hard pulls immediately. Using this app, you never have to guess if an inquiry has affected your score or worry about unexpected pulls.

Read related blog: The 7 Golden Rules: How to Use Credit Cards to Boost Your Credit Score the Right Way.

Myth #2: You Only Have One Credit Score

The Reality: The idea of a single, universal credit score is a convenient fiction. In truth, you have dozens, if not hundreds, of different credit scores.

Here’s why:

1. There are three major credit bureaus: Experian, Equifax, and TransUnion. Each one maintains its version of your credit report, and the information might differ slightly between them.
2. There are two major scoring models: FICO and VantageScore. These two companies create the mathematical algorithms that calculate your score based on the bureaus’ data.
3. Each model has multiple versions: Just like software, scoring models get updated. A lender might use FICO Score 8, while another uses the newer FICO Score 10. Each version can produce a slightly different number.
4. There are industry-specific scores: Lenders in different industries use specialized scores that weigh certain factors differently. For example, an auto lender might use a FICO Auto Score that places more emphasis on your history with car loans.

The Takeaway: Don’t obsess over a single number. Instead, please focus on the range your score falls into (e.g., poor, fair, good, excellent) and the underlying financial habits that drive it. If you practice good credit management, all your scores will move in the right direction.

Myth #3: Carrying a Small Balance on Your Credit Card Helps Your Score

The Reality: This is the most expensive myth in personal finance. The belief that you need to carry a balance from month to month to show lenders you are a “profitable” customer is fundamentally wrong. Credit scoring models do not reward you for paying interest.

They reward low credit utilization—the percentage of your available credit that you are using. Paying your statement balance monthly is the best way to keep your utilization low.

The Takeaway: Using your credit card helps your score; carrying a balance helps your bank’s profits. Treat your credit card like a debit card. Pay your full statement balance on time, every time, and you will never pay a dime in interest while demonstrating perfect financial control.

Myth #4: Closing Old Credit Cards Is Good Financial Housekeeping

The Reality: Your first credit card might have a low limit and no rewards, and it can be tempting to close it once you’ve upgraded. This is almost always a mistake. Closing an old account, especially your oldest one, can damage your score in two ways:

1. It lowers the average age of your credit history: Length of credit history makes up 15% of your FICO score. Closing your oldest account can drastically shorten this average, making your credit profile look less stable.
2. It reduces your total available credit: This, in turn, will instantly increase your overall credit utilization ratio. For example, if you have $2,000 in debt across cards with a total limit of $10,000, your utilization is 20%. If you close an unused card with a $5,000 limit, your total limit drops to $5,000, and your utilization suddenly jumps to 40%, lowering your score.

The Takeaway: As long as your old credit cards do not have an annual fee, keep them open forever. Use them for a small purchase once or twice a year to keep the account active, and let them serve as a long-term anchor for your credit history.

Read related blog: Should You Close Old Credit Cards? Impact on Credit Score.

Myth #5: Your Income, Age, or Demographics Affect Your Score

The Reality: By law—specifically, the Equal Credit Opportunity Act—your credit score cannot be calculated using personal information such as your race, color, religion, national origin, sex, marital status, or age. Furthermore, your income, employment history, and the amount of money in your bank account are not factors in traditional credit scoring models.

While a higher income can make it easier to maintain a good score by allowing you to pay bills on time and keep debts low, the score itself reflects your credit-related behavior, not your personal identity or wealth.

The Takeaway: A high income doesn’t guarantee a good score, and a low income doesn’t destine you to a bad one. Your score is a measure of your financial discipline, which is something anyone can cultivate.

Myth #6: Paying Off a Negative Item (Like a Collection) Removes It Immediately

The Reality: When an account goes to collections or is charged off by a lender, it creates a severe negative mark on your credit report. Paying off that debt is right—it stops the collection calls and prevents further legal action. However, it does not erase the past.

The record of the original delinquency will remain on your credit report for up to seven years from the date the account first became delinquent. The paid collection account will be updated to show a zero balance, which lenders view more favorably than an unpaid one, but the history of the problem will still be visible.

The Takeaway: Pay off your old debts to stop the bleeding and begin the healing process. However, credit repair is a long-term game of building a new, positive history that outweighs the old, negative information.

Myth #7: Co-signing for a Loan Is Just a Character Reference and Doesn’t Affect You

The Reality: This is a dangerous misunderstanding. When you co-sign a loan, you are not just a reference but a co-borrower. You are 100% legally responsible for the entire debt. The co-signed loan appears on your credit report as if it were your own, which increases your debt-to-income ratio and can make it harder for you to get approved for your loans. Worse, if the primary borrower is even one day late on a payment (past the 30-day reporting mark), that late payment goes on your credit report and will damage your score.

The Takeaway: Never co-sign a loan for anyone unless you are fully prepared and financially able to take over the entire debt and make every payment yourself.

Read related blog:  What Happens to Your Credit Score if You Co-Sign a Loan? A Complete Guide.

Myth #8: Applying for Lots of Credit Is Fine, as Long as You Get Approved

The Reality: Every time you apply for new credit, it results in a hard inquiry on your credit report. While one or two inquiries a year are normal, applying for multiple lines of credit quickly can be a significant red flag for lenders. It can signal that you are in financial distress or are about to take on a large amount of new debt, making you appear riskier. These multiple hard inquiries can cause a noticeable drop in your score. Some credit score myths make risky behaviors sound harmless, and this is a prime example.

The Takeaway: Only apply for new credit when you genuinely need it and have researched your chances of approval beforehand. Space out your applications by at least six months whenever possible.

Myth #9: Paying Your Bills on Time Is the ONLY Thing That Matters

The Reality: While payment history is the most important factor in your score (35% of FICO), it is not the only one. The second most important factor, credit utilization, is nearly as critical (30% of FICO). If your credit cards are consistently maxed out, you can have a perfect record of on-time payments but still have a poor or mediocre score. Think of it this way: a perfect payment history proves you’re reliable, but low utilization proves you’re not reliant on debt. Lenders need to see both.

The Takeaway: Master the top two most important credit factors: always pay your bills on time and keep your credit card balances low.

Read related blog: Avoid Late Payments: Simple Tips to Protect Your Credit Score

Myth #10: A Bad Score Is a Life Sentence

The Reality: This is perhaps the most disempowering myth of all. Your credit score is not a permanent tattoo; it’s a dynamic number constantly evolving based on new information. A bankruptcy, a foreclosure, or a series of defaults is incredibly damaging. Still, their impact lessens with each passing year, and they will eventually fall off your report entirely (typically after 7-10 years).

Every day is a new opportunity to make a positive financial choice. Every on-time payment and every dollar of debt you pay down is a step in the right direction.

The Takeaway: Your past financial mistakes do not have to define your future. You can start rebuilding your credit today. Focus on building a new track record of positive, responsible habits; your score will inevitably follow.

Read related blog: Credit Builder Loans: The Complete Pros & Cons Guide for 2025

Conclusion: Knowledge Is Your Greatest Asset

Mysterious forces or secret tricks do not govern your credit score. A clear and consistent set of rules governs it. The key to achieving an excellent score is not finding loopholes but understanding these rules and consistently practicing good financial discipline.

The path forward is simple (though not always easy): pay your bills on time, keep your debts low, be patient, and don’t fall for the myths. By arming yourself with the truth, you can confidently navigate the world of credit, save yourself thousands of dollars, and unlock a better, more secure financial future. 

With Beem’s comprehensive monitoring, alerts, and educational tools, you can confidently manage credit inquiries, avoid unnecessary score damage, and keep your credit on the right track. Download the app now.