When it comes to qualifying for the best credit cards or even renting an apartment, your credit score matters.
While establishing a good credit score is a vital piece of your overall financial picture, there are many common misconceptions about what does affect your credit score.
Below, CNBC Select asked financial expert John Ulzheimer, formerly of FICO and Equifax, the truth behind 13 of the most common credit score myths. Here’s everything you should know about what makes that magic three-digit number go up or down.
1. Checking my credit score lowers my credit score
False. Though 93% of millennials are aware of their credit score, this is probably the most common myth. Monitoring your score helps you track progress when building credit, but it is important to check it the right way.
Checking your credit score is considered a “soft pull,” which doesn’t affect your credit score. Actions, such as applying for a credit card, which requires a “hard pull,” temporarily dings your credit score.
“If you’re checking it from a legit source, like the credit bureaus themselves, then it won’t hurt,” Ulzheimer tells CNBC Select. “If you have a buddy who works for a car dealership or a mortgage broker, and they pulled your credit as a favor, everyone is going to think you’re applying for credit and the inquiry could lead to a lower score.”
You can check your credit score for free with most card issuers, using apps such as Discover’s Credit Scorecard and Chase’s Credit Journey, which are available to everyone.
2. Carrying a balance on my credit card boosts my credit score
False. Carrying a balance on your credit card doesn’t help your credit score, it only has the potential to hurt it and it will end up becoming expensive over time paying interest. Not to mention, it’s a waste of money to pay interest on your balance if you can afford to pay off your credit card bill in full each month.
Lingering balances on your account directly affect your credit card utilization rate. The higher your credit card balance, the higher your utilization rate, which can in turn hurt your credit score.
If you’re already carrying a balance on a credit card, consider transferring it to a balance transfer credit card, such as the Discover it® Balance Transfer. This can help you save money in the long run, if you commit to paying off your balance during the introductory 0% APR period.
3. My income impacts my credit score
False. Your salary and income are considered measurements of your capacity to pay bills, not your potential credit risk.
“Income isn’t even on your credit reports so it can’t impact your score,” Ulzheimer says. “Wealth metrics aren’t considered by credit scoring models.”
While it’s good to know that the size of your paycheck has no influence on whether you have good or bad credit, you should know what does impact your score. Variables include your payment history, amounts owed (utilization rate), length of credit history, new credit (how often you apply for and open new accounts) and credit mix (the variety of credit products you have).
4. A good credit score means you’re rich
False. Credit scores are just a measure of your risk (whether you pay your bills on time and in full). “A good credit score means you’re a good credit risk,” Ulzheimer says. “A low score means you’re a poor risk. That’s all they mean.”
Having a high salary doesn’t guarantee a higher line of credit, but if you update your income with a card issuer to a higher amount, you may see an increase in your credit limit, which could be positive for your credit utilization ratio (as long as you continue to pay your balance in full each month). Also some charge cards, like the American Express® Gold Card, have no preset spending limit, which means there is no assigned credit limit.
5. A perfect credit score doesn’t really matter
True. While it would be fun to say you are in the elite 850 club, there are no additional benefits of having a perfect score. No loan and credit products exist that are only available for people with perfect scores, and once you reach a certain score, you pretty much get all the same benefits anyways.
“If you have a 760 or above, you’ll likely qualify for the best deals on everything,” Ulzheimer says.
6. I don’t need to worry about my credit score until I’m older
False. The minimum age at which you can apply for credit is 18 and that’s when you should start worrying about your credit score. Financial experts recommend young people start building credit as soon as possible. The length of your credit history is a big factor in your credit score, so the sooner you establish credit the better.
For those just beginning their credit journey, check out CNBC Select’s recommendation for the best first credit card. If you’re a student, check out our list of the best cards for college students.
7. Paying off debt increases your credit score
True and false. This is true for credit card debt, but not so true for installment debt, such as a mortgage or student loan. While it is good for your overall financial life to be totally debt free, you won’t see a bump in your credit score if you pay off your car loan, for example. It can actually ding your score because it means having fewer credit accounts. That doesn’t mean you shouldn’t pay off the loan, though; you don’t want to pay unnecessary interest over time just to save a few credit score points.
Because credit cards usually have higher interest rates than installment loans, paying off credit card debt first can help you while also improving your score (if you lower your credit utilization).
8. My employer can see my credit score
False. When it comes to applying for a new job, people often think prospective employers can see their credit score. While they can pull your credit report, the type of credit report that employers have access to does not include your actual credit score.
“It’s not the same type of credit report that your lenders can see,” Ulzheimer says.
What employers do see when they run a credit check is your debt and payment history so they can look for any signs of financial distress.
9. Student loans don’t affect my credit score
False. Your credit score isn’t just impacted by your credit card bills. You need to pay all your bills on time, which includes your utilities, student loans, mortgage and any medical bills you might have.
“Default on a few student loans, and you’ll see just how much student loans affect your scores,” Ulzheimer says.
If you struggle to remember to pay your bills each month, there’s an easy fix: autopay. In the case of student loan companies, some give you a discount on your interest rate if you set up autopay.
10. Getting married will merge my credit score with my spouse
False. When you get married, your credit report stays unique to you and only you. “Credit reports are always individual at the consumer level,” Ulzheimer says.
When it comes to applying for new credit with your partner, such as filling out a joint application for a mortgage, each partner’s credit score is taken into consideration by the lenders. Once a joint loan is opened, the positive and negative actions both you and your spouse take are reflected on both of your reports.
11. Using debit cards helps build a good credit score
False. Debit and credit cards are two entirely different things. Since debit cards are not a form of credit, they never end up on your credit reports and thus have no influence on your credit score.
12. Closing a credit card improves my credit score
False. Closing a credit card will never improve your credit score — in fact, it’s likely to ding your score and that’s one reason experts generally don’t recommend it. But there are some specific circumstances to think about before deciding whether or not to cancel your credit card.
If your card has no annual fee, then there’s really no harm in keeping it open. But if you’re losing money on the card, you can call up the card issuer and ask if you can switch to a no annual fee credit card. If you’re being charged a high interest rate, it might be beneficial to close a credit card.
The Capital One CreditWise app offers a simulator so you can see how taking certain actions (closing a card or paying off a balance) might impact your credit score. This is a good place to start if you’re worried that closing your card might make your score go down.
13. Selecting ‘credit’ while using my debit card for a purchase helps raise my credit score
False. If you choose “credit” instead of “debit” next time you’re at the cash register, know that your credit score will not be affected in any way since your debit card activity does not get reported to the credit bureaus. Debit cards have no effect on your credit history nor credit score, so whether you use your debit card as debit or credit, the money is still withdrawn directly from your checking account.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.