18 Credit Card Misconceptions Debunked: Facts vs. Fiction

There are many Credit Card Misconceptions. Some people think that they are a waste of money, while others think that they are the key to financial freedom.

In this blog post, we will debunk 18 common credit card myths and set the record straight!

18 Credit Card Misconceptions Debunked Facts vs. Fiction
18 Credit Card Misconceptions Debunked Facts vs. Fiction

Myth #1 – Closing a credit card account will improve your credit score

One of the most common Credit Card Misconception is that closing a credit card account will improve your score. This may seem logical at first glance – after all, if you have fewer accounts open, there’s less chance of you getting into debt, right?

However, this isn’t actually how credit scores work. In reality, closing an account can do more harm than good. This is because one of the key factors in calculating a credit score is your “credit utilization ratio.”

This is a measure of how much of your available credit you’re using – and closing an account will lower your overall credit limit, thereby raising your credit utilization ratio.

This can in turn lead to a decline in your credit score. So if you’re looking to improve your credit rating, it’s best to keep your accounts open – and strive to use them responsibly.

Myth #2 – Credit utilization ratio is the only factor that impacts your credit score

There are a number of factors that contribute to your credit score, and credit utilization is just one of them. Payment history, credit history length, and the types of credit you have are all important factors as well.

That said, credit utilization can have a significant impact on your score, especially if you’re carrying a balance on your cards. Utilization measures the amount of debt you’re carrying in relation to your credit limit, and it’s expressed as a percentage.

The lower your utilization, the better it is for your score. So, if you’re trying to improve your credit score, paying down your debt is a good place to start. But don’t forget that there are other factors to consider as well.

Myth #3 – My income has an impact on my credit score.

Credit Card Misconception that their income has an impact on their credit score. While it’s true that lenders will consider your income when you apply for a loan, your credit score is not directly affected by how much money you make.

Instead, your credit score is based on your payment history, the amount of debt you have, the length of your credit history, and other factors.

So, even if you have a low income, you can still build a good credit score by making on-time payments and keeping your debt levels low.

Myth #4 – You need a good credit score to get approved for a mortgage

There’s a lot of misinformation out there when it comes to mortgages, and one of the most common myths is that you need to have a good credit score to get approved.

The truth is, however, that there are several other factors that lenders will take into account when considering your application. While a good credit score can certainly give you an advantage, it’s by no means essential.

If you have a steady income and a reasonable debt-to-income ratio, you should be able to qualify for a mortgage, even if your credit score isn’t perfect.

So don’t let good credit be the only thing standing between you and your dream home. talk to a lender today and find out what options are available to you.

Read More: Best Credit Card for bad Credit

Myth #5 – A good credit score indicates you have a lot of money.

A good credit score is important, but it doesn’t necessarily mean you have a lot of money. One of the most common misconceptions about credit scores is that they indicate how much money you have.

The truth is, your credit score is based on your credit history, which is a record of your borrowing and repayment activity.

So, if you’ve been responsibly managing your finances and paying your bills on time, you’re likely to have a good credit score.

However, if you’ve been neglecting your payments or using too much of your available credit, your score will suffer. Either way, your credit score isn’t a reflection of how much money you have in the bank.

Rather, it’s an indicator of how well you manage your finances. As such, it’s important to remember that a good credit score doesn’t mean you’re wealthy. It just means you’re good at handling money.

Myth #6 – Carrying a balance on your credit card will improve your credit score

It’s a common misconception that carrying a balance on your credit card will improve your credit score. In reality, it’s the opposite – remaining debt-free is the best way to maintain a healthy credit score.

Credit utilization, which is the percentage of your credit limit that you’re using, is one of the factors that determine your credit score. So, if you’re maxing out your credit card each month, your score will suffer as a result.

On the other hand, if you pay off your balance in full each month, your score will benefit. In addition, carrying a balance can lead to expensive interest charges, which can put you in a financial hole that’s difficult to climb out of.

Ultimately, it’s best to avoid debt altogether – it’s not worth the risk to your financial well-being.

Myth #7 – It doesn’t matter if you have a perfect credit score.

There are a lot of myths out there about credit scores. You might have heard that it doesn’t matter what your credit score is, as long as you make your payments on time.

However, this couldn’t be further from the truth. Your credit score is a measure of your creditworthiness, and it can have a major impact on your financial life.

For example, if you’re looking to take out a loan, your interest rate will be partially determined by your credit score. A higher score means lower interest rates, which can save you thousands of dollars over the life of the loan.

Additionally, your credit score can affect your ability to rent an apartment or get a job. In short, there’s no reason to ignore your credit score. It’s an important number that deserves your attention.

Read More: Best Credit Card for excellent Credit

Myth #8 – Cancelling a credit card will hurt your credit score

If you cancel a credit card, does it mean your credit score will drop? The answer is “it depends.” Canceling a credit card can hurt your credit score if it results in a lower credit utilization ratio.

That’s because your credit utilization ratio is the amount of debt you have divided by the amount of credit you have available, and it makes up 30% of your FICO® Score.

So, if canceling a credit card decreases the amount of credit you have available and doesn’t decrease your debt, your credit utilization ratio will go up, which could hurt your score.

On the other hand, canceling a credit card could help your score in the long run if you’re trying to get rid of debt. That’s because having less access to credit can help keep you from racking up more debt and increase your payment history (which makes up 35% of your FICO® Score).

So, if you cancel a credit card and pay off the balance right away, your score could go up.

Myth #9 – My credit score decreased when I check it. 

Checking your credit score doesn’t hurt your credit. It can help you stay on top of your credit health and identify any potential problems early on. There are three main credit reporting agencies in the United States: Equifax, Experian, and TransUnion.

You’re entitled to a free credit report from each of them every 12 months. You can request your reports all at once or space them out throughout the year. Once you have your reports, review them carefully to make sure there are no errors or inaccuracies.

If you see anything that looks off, dispute it with the credit bureau. Checking your credit report has no impact on your credit score.

However, if you apply for new credit, the lender will most likely check your credit report as part of their approval process. This is called a hard inquiry, and it can temporarily lower your credit score by a few points.

But as long as you manage your new credit responsibly, your score should rebound within a few months. So don’t be afraid to check your own credit report frequently. It’s one of the best ways to stay on top of your credit health.

Myth #10-Credit cards are evil and only lead to debt

Credit cards are often demonized as the root of all debt problems. While it’s true that credit cards can lead to debt, they are not evil in and of themselves.

In fact, using responsibly, credit cards can be a valuable tool. With a credit card, you can make purchases now and pay for them later. This can be helpful in an emergency or when you need to make a large purchase but don’t have the cash on hand.

Credit cards also offer fraud protection, so if your card is stolen, you will not be held responsible for any unauthorized charges.

And finally, using a credit card wisely can help you build a strong credit history, which will come in handy when you need to take out a loan for a major purchase like a car or a house.

So while credit cards should be used with caution, they are not evil and can be quite helpful if used wisely.

Myth #11-I don’t have to be concerned about my credit score until I’m older.

While it’s true that your credit score won’t have as much of an impact on your life when you’re young, that doesn’t mean you should neglect it. A good credit score can help you qualify for better interest rates on loans and credit cards, saving you money over the long term.

Additionally, a strong credit score will come in handy if you ever need to rent an apartment or buy a car. Landlords and lenders often look at credit scores when making decisions about whether to approve applications, so it’s important to start building a good credit history as early as possible.

By taking steps to improve your credit score now, you’ll be in a better financial position later on in life.

Myth #13 – A new credit card will lower your credit score

One common misconception about credit is that you should avoid opening new lines of credit because it will lower your score. In reality, opening a new credit card can help to improve your credit score.

This is because part of your score is based on your “credit mix,” which takes into account the different types of debt that you have.

By adding a new credit card to your mix, you can actually improve your score.

Additionally, if you use the new credit card responsibly and make all of your payments on time, you can also build up a positive payment history, which will further boost your score.

Therefore, contrary to popular belief, a new credit card can actually help increase your credit score.

Myth #14 – Paying off debt improves your credit score.

One common debt-related myth is that paying off debt will automatically improve your credit score. While it’s true that owing less money can help your credit score in some cases, other factors are also important.

For example, the length of your credit history and payment history are both taken into account when calculating your score. So even if you pay off a debt, if you have a short credit history or a history of late payments, your score may not improve as much as you would like.

In addition, the types of debts you have can also affect your score. For example, outstanding balances on credit cards are generally more damaging to your score than unpaid medical bills.

So while paying off debt can be a good first step in improving your credit score, it’s important to understand the other factors that are involved.

Myth #15- Closing a credit card account will improve your credit score

When it comes to credit scores, there are a lot of myths and misconceptions floating around. One such myth is that closing a credit card account will improve your score.

In reality, closing an account can actually have the opposite effect. This is because one of the factors that goes into calculating a credit score is the length of your credit history.

By closing an account, you are effectively reducing the length of your history, which can in turn lead to a lower score.

Additionally, closing an instance of good credit can also make it more difficult to obtain new lines of credit in the future.

So before you close that account, be sure to do your research and understand the potential impact on your credit score.

Myth #16-My boss has access to my credit score.

Bosses may be able to see some personal information about their employees, but credit scores are not one of them. Credit scores are calculated using financial information that is not accessible to employers.

In addition, credit scores are not part of an employee’s credit report. This means that bosses cannot request a copy of their employees’ credit scores.

The only way for a boss to see an employee’s credit score is if the employee voluntarily shares it with them.

However, employers can pull an employee’s credit report if they have a legitimate business reason for doing so.

For example, if an employee is applying for a position that requires handling money, the employer may want to review the employee’s credit history to ensure that they are financially responsible.

However, employers cannot pull an employee’s credit score without their consent. So, if you’re worried about your boss seeing your credit score, you can rest assured knowing that it is safe from prying eyes.

Myth #17-All interest rates are the same

It’s a simple notion, really. The interest rate is the amount of money you’ll pay (or earn) on an investment, and it’s typically given as a percentage. A higher interest rate means more money for you (if you’re the lender), or more money owed by you (if you’re the borrower).

So it would stand to reason that all interest rates are the same, right? Not so fast. There are a few different types of interest rates, and each one can have a big impact on your finances.

Here’s a look at the three main types of interest rates and how they work.

  • The first type of interest rate is the annual percentage rate (APR). APR includes not only the interest rate but also any fees charged by the lender. This makes APR a good tool for comparing different loans because it lets you see not only the interest rate but also how much in fees you’ll be paying.
  • For example, two loans could have the same interest rate but different APRs if one loan has higher fees than the other.
  • The second type of interest rate is the nominal interest rate. This is simply the stated interest rate on a loan; it doesn’t include any fees. So if a loan has a nominal interest rate of 12%, that means you’ll pay (or earn) 12% interest on the loan, without any additional fees.
  • The last type of interest rate is the effective interest rate. This takes into account both the stated interest rate and any compound interest. Compound interest is when you earn (or pay) interest not only on the original loan amount but also on the interest that has accrued.

Myth #18-My credit score is unaffected by educational loans. 

Educational loans can help students pay for college, but they can also hurt their credit scores. Although federal student loans are not reported to credit agencies, private student loans are.

Furthermore, if a student falls behind on their payments, this will also be reflected on their credit report. In addition, the amount of debt that a student has can also influence their credit score.

Therefore, students need to be aware of the potential impact that educational loans can have on their credit scores.

By taking out loans wisely and making timely payments, students can minimize the negative impact on their credit score.

Myth #19-I will be able to merge my credit score with that of my spouse once we get married.

Marriage doesn’t create a joint credit report or a new credit score. You and your spouse will continue to have separate credit reports and scores. Loan applications still require each applicant to provide his or her individual Social Security number, so the lender can check that person’s credit history.

A good credit score is important for getting the best rates on loans. If you’re applying for a mortgage, auto loan, or student loan, the interest rate you’ll pay will be based on both your credit scores.

Even if one spouse has excellent credit and the other has poor credit, the interest rate on the loan will be based on the lower of the two scores.

Before you get married, it’s a good idea to check both your credit reports and scores and correct any errors you find.

Myth #20-Using debit cards to make purchases help you build a good credit score.

While using a debit card doesn’t affect your credit score, it can be helpful in other ways. For example, if you’re trying to improve your financial habits, using a debit card can help you stay within your budget since you can only spend the money you have in your account.

Debit cards can also be helpful if you’re trying to avoid debt because you’re not borrowing money when you use one.

And, if you have a checkered credit history, using a debit card can help you prove to lenders that you’re responsible with money and capable of making regular payments on time.

So, while a debit card won’t directly help you build a good credit score, it can be helpful in other ways.


There are a lot of myths about credit scores and how they work. It’s important to be informed so that you can make the best choices for your financial future. Remember, your credit score is important for getting the best rates on loans.

By taking out loans wisely and making timely payments, you can minimize the negative impact on your credit score.

I hope this article has helped clear up some of the myths about credit scores. If you have any questions, please feel free to leave a comment below.

Thanks for reading!

About Author

Dhiraj Jha
Dhiraj Jha
As a personal finance and credit cards expert, I provide valuable insights and advice on budgeting, saving, investing, and debt management. I am also an expert on credit card rewards programs and help readers make informed decisions about which cards are right for them. My goal is to help people improve their financial literacy and make better financial choices.