4 Credit Score Myths You Can't Afford to Believe

Don't buy into these misconceptions. Get the facts.

Your credit score isn't just a random number -- it's an indication of how reliable you've been in borrowing. The higher your credit score, the more likely you are to get approved to open a credit card, take out a mortgage, or borrow money with a personal loan. So you can't afford to buy into the many myths that circulate about credit scores. Here are a few such myths, debunked.

1. Closing credit cards is good for your score

You might assume that having fewer credit cards is good for your score, because it means you spend and borrow less. In fact, closing accounts can hurt your score in two ways.

First, canceling cards means losing the credit they provide you. And one major factor in calculating your credit score is your credit utilization ratio, which measures your available credit against the amount you've borrowed. If you close a card with a $3,000 spending limit, for example, your credit utilization ratio climbs as the amount of available credit drops, and that's not a good thing -- keep that ratio to under 30% to avoid a hit to your score.

Another issue with closing credit cards: the length of your credit history is also part of calculating your score. If you close an account you've held for a long time, your score could take a hit.

2. Checking your credit report hurts your score

It's a good idea to check your credit report every few months to spot any fraudulent activity and see where your loan balances stand. Checking your credit report won't harm your credit score -- so don't let anyone convince you it might.

On the other hand, when a credit card issuer or mortgage lender checks your credit report, that's a hard inquiry, and that will bring your score down a bit. That's why it's smart not to apply for too many new loans or credit cards at once. But checking your own credit report should not pose an issue at all.

3. The more you earn, the higher your score

Income has nothing to do with your credit score. Rather, your credit score measures how well you pay your bills and manage your credit. While earning more money may make you more likely to keep up with your bills, it's possible to be quite wealthy and still pay your bills late, or take on too many bills and fall behind.

4. You and your spouse share a credit score

Married couples may share a lot of things, but a credit score isn't one of them. When you tie the knot, you still have your own credit score, as does your spouse. If you have joint debts like a mortgage, the way you manage them reflects upon your credit scores similarly. In other words, if you fall behind on your home loan, your score will take a hit, and so will your spouse's. But you can have a great credit score while your spouse has a poor score, or vice versa.

The more you know about credit scores, the better positioned you are to boost yours or keep it in good shape. Don't believe the above myths -- even though they might appear to make sense.