Credit scores and credit reports are more accessible than ever, but many common credit myths just won’t die.
A whopping 51% of Americans wrongfully believe having accounts with high balances will help a credit score so long as those accounts are paid on time, according to the latest Bankrate Money Pulse survey.
In fact, these balances will count against your credit utilization rate, which could hurt your score. This rate, which is essentially how much debt you are carrying versus how much credit has been extended to you, accounts for 30% of the popular FICO score.
And 37% of consumers erroneously believe you have to carry a balance on a credit card to improve credit, even though simply having the card will build your credit history.
Meanwhile, just 1 in 4 consumers was able to correctly identify that closing old accounts they no longer use will hurt their credit score, while fewer than 1 in 3 recognized that limiting themselves to a single credit account could be holding back their score.
The confusion comes at a time when a majority of Americans are – at the very least – checking their credit status. A March 2015 Bankrate survey found nearly half of Americans (46%) have checked their credit score within the past year. Another 14% have checked their score within the past 3 years.
The monitoring has helped consumers boost their credit score knowledge. A June 2015 survey from the Consumer Federation of America found small but broad improvements in consumer credit score knowledge between 2014 and 2015.
“Those that have received their credit scores in the last year have higher knowledge levels,” says Stephen Brobeck, the CFA’s executive director, but “the knowledge of a large majority remains fairly general.”
But “while more people seem to be looking, you’re still talking about a significant amount of people who don’t look at their credit report … and don’t know their score,” says Kevin Weeks, president of the Financial Counseling Association of America, formerly known as the Association of Independent Consumer Credit Counseling Agencies.
And those who check their credit may be missing a few things.
