9 Myths About Credit Scores

"People think they know what causes a credit score to rise or fall. They’re often wrong."
Writing for The Wall Street Journal, Demetria Gallegos, explains how credit scores work.
Why are credit scores important?
"A higher score can mean better terms on credit cards, lower rates on mortgages and less expensive premiums on auto and homeowners insurance. It can make it more likely to win approval for an apartment, and get deposits waived when setting up services like electricity and cable in a new home. It can even mean a better chance at nabbing a job offer."

MYTH: Checking my credit score hurts my credit score

MYTH: If I pay my bills on time, that’s all I need to worry about.
Your credit utilization ratio plays a big part in determining your score.

MYTH: Carrying a balance helps boost my credit score.
No! It's one of the worst financial practices.

MYTH: Closing an old credit card with a high interest rate will help my score.
Hold on to old accounts even if you don't use them; having a long history of credit is important.

MYTH: Opening a new retail credit card is a good for your score.
No and these cards charge very high interest!

MYTH: It hurts my credit score to comparison shop for a mortgage, auto or student loan

MYTH: The older my unpaid debt, the more it hurts me.
While bankruptcy will remain on your report for up to 10 years, "it’s the newer delinquencies that will be more aggressively collected" and hurt your score

MYTH: Selecting ‘credit’ while using your debit card for a purchase is good for your credit score

MYTH: Credit reports are accurate. 21% of reports contain inaccurate information. Monitor your data by checking your reports every 4 months:
https://www.annualcreditreport.com/

There are a few existing and coming programs that aim to help consumers demonstrate responsible financial behavior in areas not previously visible to the credit-reporting companies.

Rental reporting "Paying your rent on time can now help your credit score. Such reporting is handled either by big landlords and property-management companies or by individuals who go through a company that verifies and reports the payments."
Phone and utility bills "Experian Boost, a free program launched last December by credit-reporting company Experian, factors household payments for services like telephone, cable and utilities into a person’s FICO score. Consumers connect Experian Boost to the bank account they use for paying these bills. The program then pulls the relevant payment history and immediately recalculates their FICO score."
Bank accounts "In a program expected to launch to consumers next year, FICO will begin taking into account consumers’ banking habits. Under the free program, called UltraFICO, consumers sign up to allow the program to link to their checking, savings or money-market accounts. Consumers are then rated on factors including the account balances they maintain, how long the accounts have been open and avoiding overdrafts."
Learn more about free credit reports: https://www.consumer.ftc.gov/articles/0155-free-credit-reports