10 Common Credit Score Myths


Despite the critical role credit score plays in our lives, so many Canadian’s know so little about it. Not understanding how a credit score is calculated or impacted makes it extremely difficult to maintain a healthy score. For as long as you’re making purchases, you’re going to have a credit score. If you’re buying a house, unless you’re a lottery winner, you will have to rely on a loan to be able to pay for it, and without a good credit score, no lender will approve you. Because of this, we felt it was important to flush out some of the common myths about credit scores. In this article, we’re going to talk about the 10 most common credit score myths.

1. Checking Your Credit Hurts Your Score

We made this the first myth because it’s the most common misconception about credit. Doing a credit check does not have to impact your credit score if you do what’s called a “soft hit” credit check. Companies like Equifax and Credit Karma offer tools for you to check your credit score without impacting your credit. 

Where this misconception stems from is when you need to get your credit checked by a third party, say for a car loan for example. This is a situation where your credit score can be impacted by asking for your credit report. Because of this, we recommend only asking for a credit report when necessary. If you’re just curious about where your credit stands, use Equifax or Credit Karma’s tool. 

2. Your Income Impacts Your Credit Score

Your income has absolutely no impact on your credit score. Your credit score is based on the bills you have and how much you owe, not your income. Although, it may be easier to keep a better credit score if you make a lot of money because you should have less trouble paying your bills. 

3. Closing a Credit Card Hurts Your Credit Score

This is another common yet false belief. If you keep your credit card balance in good standing and then decide to close the account, your credit score will not be affected. Even if you close the credit card with a negative balance, the impact will be minimal. The history of your credit cards will be with you for the next 6 years, even with closed credit cards. 

4. Having a Great Credit Score Means Your Wealthy

This one ties into the second myth about how income impacts your credit. Regardless of your income, as long as you consistently pay your bills in full and on time, you’ll have a good credit score. You could be making minimum wage but paying your bills and have better credit than someone making $100,000 a year that misses payments. 

5. Having a Balance on Your Credit Card Will Improve Your Score

No and this is the furthest thing from the truth, keeping a balance on your credit score will actually negatively affect your credit score. Keeping a balance on your credit score will make it look to lenders that you’re refusing to make payments, plus you’ll be paying more interest. Credit reports want to see you make all of your payments in full and on time, just paying the minimum amount wil do nothing to improve your credit. 

6. Using Debit Cards Will Improve Your Credit Score

Using your debit card has absolutely no impact on your credit score because debit cards have nothing to do with credit. This is because using debit is spending money from a chequing or savings account, meaning this is money you already have. Assuming you’re able to afford the payments, it can be a good habit to use your credit card to pay for things like groceries and gas so you can immediately pay it off and improve you credit. Credit companies like to see activity on accounts so even if you can use your credit card to make small purchases it can aid your credit score.

7. Getting Married Will Affect Your Credit Score

The misconception of this one is that if your partner has bad credit, this can impact your credit as well. This is entirely false is your credit score is only a reflection of your own spending/credit habits. However, if you’re making a large joint purchase on something like a house which will require a loan, both you and your partners credit will be looked at. If you or your partner has bad credit, this could impact the type of loan you’re approved for.

8. Employers Can Check my Credit

It’s actually illegal in Canada for employers to look at an applicants credit score as a way to screen applicants. For an employer to do this doesn’t make a ton of sense as it is completely out of their concern to know how you manage your finances. 

9. You’ll Always Have Bad Credit

Don’t get discouraged if you have bad credit, there are a ton of things you can do to improve your credit score. Of course if you continue to miss payments your credit will not improve, but if you can make a conscious effort to make payments you’ll see your score improve. In fact, one of the best ways to improve your credit is through a car loan. 

10. You Can’t Get Approved for a Loan With Bad Credit

If you’re looking to get a loan, having good credit will increase the likelihood of being approved and get you a lower interest rate. If you have bad credit, there’s still a good chance you’ll be able to get approved for a loan, but on different terms. With bad credit you can expect to have a higher interest rate and potentially the requirement to make a down payment. Lender’s want to be confident in the borrowers ability to repay loans and if they’re not, the terms will be less favourable for the borrower.

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