There are a lot of misconceptions out there about credit scores. I don’t blame you for being confused. Credit scores can seem a little mysterious, especially since there are dozens of different scores.
So, let’s bust a few myths and get to the truth. Then you can use the information to build a fabulous credit score.
Here are five of the most damaging credit score myths:
Myth No. 1: You have to carry a balance to build credit.
This credit score myth has survived for way too long. I’ve made it my personal mission in life to bust this myth. It’s one of the most harmful beliefs because it costs you money. And due to compound interest, you can end up in debt.
Your lender reports your payment history monthly to the major credit bureaus. If you pay on time, you get points for that. If you pay on time while also carrying a balance, you do not get extra points for that. So, you’re paying interest on your purchases for no extra benefit. In fact, you’re losing money.
[Read: The Best Credit Cards for Bad Credit of 2018.]
Stop the madness and pay your bill in full and by the due date. You’ll reap the benefits of a great score for no extra charge.
Myth No. 2: Closing out credit card accounts will boost your score.
I actually understand the logic behind this myth. You’d think that decreasing your amount of available credit might win you favor from the FICO score. You believe it shows you can pay your bills just fine without being dependent on a lot of credit.
Unfortunately, the score isn’t set up to reward you for this. Closing an account impacts your credit utilization ratio. This ratio is the amount of credit you’ve used compared with the amount of credit you have available. If that ratio is too high, it can lower your score.
Here’s how it works: Let’s say you have two credit cards and they each have a $1,000 credit limit. So, you have $2,000 of available credit. You have a $300 balance on one card and a zero balance on the other card. In this scenario, your ratio is only 15 percent (300/2,000). This is an excellent ratio and it will help boost your credit score.
Now, close out the zero-balance card, and your ratio shoots up to 30 percent (300/1,000). This is still a very good utilization ratio, but the percent has doubled. You won’t get as big of a score boost with 30 percent as you will with 15 percent.
Myth No. 3: Employers check your credit scores.
If you’re looking for a job, you can stop worrying about this. Employers do not check your credit score. They might check your credit report, but your credit score isn’t on your credit report.
[Read: The Best Cash Back Credit Cards of 2018.]
A survey by CareerBuilder in 2016 showed that only 29 percent of employers did credit checks. But this number also changes based on job description. If your job has financial responsibilities, you’re more likely to have a credit check. In any case, a potential employer needs to ask your permission before looking at your credit report.
According to a 2016 WalletHub survey, 34 percent of the public believes that anyone can access your credit report and score. Maybe that belief has fueled this myth. So just to clarify, your report and your score aren’t public information. You have privacy thanks to the Fair Credit Reporting Act, which limits access to your credit file to only those with a “valid need.”
Bottom line? Check your free annual credit reports from the three bureaus and make sure your reports look accurate. That way, even if your potential employer decides to take a look, you won’t have to worry about it.
Myth No. 4: You and your spouse have a joint credit report.
This scary myth has kept some married folks from building their own credit histories. Some believe you can reap all the same credit benefits just from being an authorized user on your partner’s credit card account. That isn’t the case.
There’s no such thing as a joint credit report. You each have your own credit report. According to a 2017 TransUnion survey, almost 44 percent believe that credit reports include marital status. No, marital status is not on your report.
Here’s the problem: If you’d only been an authorized user for decades, you’d have some credit history, but you wouldn’t get the credit boost that comes from being the credit card account owner.
[Read: The Best Rewards Credit Cards of 2018.]
This can be an issue if you get divorced. The one who has a limited credit history will have a tougher time buying a home or even buying a new car. Starting a new financial life will take time.
On a side note, you don’t have to be married to get a joint account. But getting a joint credit card account isn’t the best idea, anyway. With a joint account, you’re both legally responsible for the debt. If one partner is a spendthrift, it can ruin the credit of the other person.
Myth No. 5: You must have a high income to have a high score.
Like marital status, your income isn’t on your credit report and it isn’t a factor in your credit score. A person with a $200,000 yearly salary who maxes out credit cards could have a lower credit score than someone who makes $50,000 a year but uses credit responsibly.
It’s all about scoring high on the factors that make up a credit score. For a FICO score, here’s how the factors are weighted: payment history (35 percent), amounts owed (30 percent), credit mix (10 percent), new credit (10 percent) and length of credit history (15 percent).
Now, just to be thorough, keep in mind that your income will be considered by the lender when you apply for credit. For example, your debt-to-income ratio will be reviewed. But stay out of debt and use credit responsibly and your income won’t be a liability.
More from U.S. News
Here’s Why Your Credit Score Might Fall
How a New Law Will Let You Freeze Your Credit Files for Free
10 Factors That Don’t Affect Your Credit Scores
5 Harmful Credit Score Myths originally appeared on usnews.com
