Credit cards can be helpful tools for building a strong financial foundation, but many people are guided by credit score myths that lead to the wrong choices. These myths can quietly damage your score and hurt your ability to qualify for loans or secure good interest rates.
This article clears up five widespread credit myths, while explaining how credit history, credit accounts, and credit card limits really work. Understanding these truths is key to managing your credit responsibly and avoiding costly mistakes.
There’s a lot of outdated or incorrect advice about credit. Some of it sounds reasonable, but it can actually hurt your credit in the long run. For example, closing a credit card might seem smart, but if it shortens your credit history or increases your utilization rate, it may lower your score.
Let’s walk through the most common myths and set the record straight.
Many people believe that closing a card shows lenders you're financially responsible. But closing a card often does more harm than good. It reduces your available credit, which directly increases your credit utilization ratio, one of the most important factors in your credit score.
For example, if you have a $10,000 total limit and a $2,000 balance, your utilization is 20%. But if you close a card and your total limit drops to $5,000, that same balance now represents 40% utilization, which may negatively impact your score.
Before you close a card:
If it’s one of your oldest cards, closing it could shorten your credit history, which may also lower your score.
To learn how this fits into your full credit picture, visit What is a Credit Score and How is It Calculated?
Each credit card account impacts your credit differently. The account itself contributes to your payment history, total available credit, and age of credit. Your credit card balance, on the other hand, directly affects your credit utilization.
Keeping balances below 30% of the limit—and ideally below 10%—is best. If your balance is high when your statement closes, it could look like you're using too much of your credit limit, even if you pay it off before the due date.
Your credit limit isn't just the maximum you can spend; it’s a key part of how your score is calculated. High limits with low balances can help you:
In fact, asking for a higher limit on an existing card can improve your credit, as long as you don’t increase your spending.
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Your available credit is the amount you’re not using. For example, if your limit is $5,000 and your balance is $500, your available credit is $4,500. Using only a small portion of your credit shows responsible behavior.
The utilization rate is the percentage of credit you're using. Lower is better, especially across all cards combined. High utilization, even for a short period, can lower your score. If you make a large purchase, try to pay it off before your billing cycle ends.
This is one of the most costly myths. Carrying a balance doesn’t help your credit score; it only results in more interest charges. Your score improves when you use credit and pay it off regularly.
Carrying a balance raises your credit card debt, increases your utilization, and wastes money on interest. It does nothing to boost your score.
Instead of carrying debt, focus on real improvements like the tips in 5 Actions You Can Take to Improve Your Credit Score
Your credit accounts include credit cards, loans, and other open lines of credit. A strong mix of accounts contributes to your credit history, which makes up a portion of your score.
Keeping older accounts open helps improve your average age of credit. Closing them shortens your history and could weaken your profile, even if you no longer use the card.
Taking out an installment loan like a car loan, and managing it well, can help diversify your credit history. If you're just starting out, building credit with a secured card or small loan can lay the groundwork.
For a deeper look at the role of account age, see All You Need to Know About Credit Scores
It's true that submitting a credit application triggers a hard inquiry, which may cause a small, temporary dip in your score. But that doesn't mean you should avoid applying for new credit altogether.
Opening a new credit card account can actually help your score over time by increasing your available credit and lowering your overall utilization rate. Just avoid making too many applications in a short period, which may suggest you're financially unstable.
Credit scoring models like FICO and VantageScore use similar factors when calculating your score:
Too many new accounts can hurt temporarily, but having a few well-managed accounts helps your credit. Spacing out applications and monitoring your reports is the key.
Be sure to check if a card charges an annual fee, especially if you don’t plan to use it often.
Many people fear checking their credit reports because they think it will affect their score. In fact, when you check your own credit, it's considered a soft inquiry and has no effect at all.
Only lenders making a credit application inquiry trigger a hard inquiry, which might slightly impact your score.
Regularly checking your credit score is smart. It helps you:
You can check your credit reports for free at AnnualCreditReport.com, which allows access to all three credit bureaus: Experian, TransUnion, and Equifax.
There’s a key difference between checking your credit score and checking your credit reports:
Monitoring both helps you stay informed and avoid decisions that may hurt your credit.
Some people believe that your marital status directly affects your credit. This is false. Your score is linked to your Social Security number and your personal credit history.
However, shared credit card accounts, joint loans, and co-signed accounts do impact both partners. If one person has a late or missed payment, it will show on both credit files.
Also, adding someone as an authorized user can help improve their credit score, but only if the account is managed well.
Let’s bust a few more:
To improve your score and avoid these traps:
If you're unsure about your next steps, start with this helpful guide: 5 Actions You Can Take to Improve Your Credit Score
Stay informed by using official resources like:
If you’ve gotten in too deep with credit card use, we’re here to help. Call today or get started online with a priority financial counseling session.
