5 Credit Score Myths That Could Affect Your Loan Rate

Quick Answer: What’s the Fastest Way to Improve Your Credit?

The fastest way to improve your credit score is to make payments on time, pay down credit card balances, review your credit reports for errors, and apply for new credit only when you need it. Keeping older accounts open may also help, depending on the account and your overall credit profile.

Some changes, such as paying down a high credit card balance, may be reflected relatively quickly. Building a strong credit history usually requires consistent habits over time.

What Factors Affect Your Credit Score?

Credit scores are generally influenced by payment history, credit utilization, length of credit history, credit mix, and recent credit inquiries. Making payments on time and keeping balances manageable are often among the most important factors.

Here’s a simple breakdown of the factors credit-scoring models commonly consider:

• Payment history — Do you make your credit and loan payments on time?
• Credit utilization — How much of your available revolving credit are you currently using?
• Length of credit history — How long have your accounts been open?
• Credit mix — What types of accounts do you manage, such as credit cards, auto loans, or mortgages?
• New credit and inquiries — How frequently have you applied for new credit?

These five factors provide helpful context for the myths below.

Why Credit Score Myths Can Cost You Money

Your credit score is one piece of information a lender may consider when reviewing an application. A stronger credit profile may help you qualify for more favorable borrowing options. A weaker profile could affect your interest rate, loan amount, or other terms.

Approval and loan terms cannot be guaranteed because requirements vary by loan type and borrower. Still, understanding how credit works can help you make more informed decisions before you apply.

Related Reading: Cracking the Credit Code: The Ultimate Guide to Decoding Your Credit Score

Myth 1: Checking Your Credit Score Hurts It

The truth: Checking your own credit score doesn’t hurt it. This is one of the most common—and limiting—credit myths out there.

There are two main types of credit checks:

• Soft inquiry: This happens when you check your own credit and may also be used when a lender prequalifies you for an offer. Soft inquiries don’t affect your credit score.
• Hard inquiry: This generally happens when you formally apply for credit and a lender reviews your report. A hard inquiry may lower your score slightly and temporarily.

So, checking your own report? Totally safe. In fact, you should do it regularly. Regularly reviewing your credit report can help you catch errors, spot signs of fraud, and better understand your overall credit health before applying for new credit.

Request your free credit reports: Visit AnnualCreditReport.com to request free weekly reports from Equifax, Experian, and TransUnion. It’s the website authorized by federal law, and checking your own reports there won’t affect your credit score.

Consider reviewing your reports periodically and before applying for a major loan.

What About Rate Shopping?

When you shop for a mortgage or auto loan, multiple hard inquiries for the same loan type within a focused period may be treated as a single inquiry.

The exact window can range from 14 to 45 days, depending on the credit-scoring model. Keeping your applications within a short time frame may help limit their overall effect.

Myth 2: Carrying a Credit Card Balance Builds Credit

The truth: You don’t need to carry a balance or pay interest to build credit.

This is one of the most expensive credit score myths out there. What actually helps is using your credit card and paying it off. Your card activity gets reported either way. Carrying a balance from month to month just means you're paying interest for no credit benefit.

What really matters here is credit utilization (the percentage of your available credit you're using). Generally, lower credit utilization is better. A common rule of thumb is to keep utilization on the lower side, and many people with strong credit keep it well below a third of their limit.

Example: Say you have a credit card with a $5,000 limit and a $1,500 balance. Your utilization on that card is 30%. If you lower the balance to $500, your utilization falls to 10%.

Credit card issuers generally report account information monthly, often using the balance shown around the end of a billing cycle. Because reporting schedules vary, keeping your balance manageable throughout the month is more reliable than trying to time one specific reporting date.

Bottom line: If you use a credit card, keep the balance manageable, make payments on time, and pay the full statement balance whenever possible.

Myth 3: Closing an Old Credit Card Always Helps

The truth: Closing a credit card can sometimes hurt your score, especially if you carry balances on other cards.

Closing a card reduces your total available credit. If your balances remain the same, your overall utilization percentage can increase.

For example:

• You have $10,000 in total credit limits and $2,000 in balances.
• Your overall utilization is 20%.
• You close a card with a $5,000 limit.
• Your utilization rises to 40%, even though your debt didn’t change.

Closing a card doesn’t usually erase its history immediately. Accounts closed in good standing may remain on your reports for years and may continue contributing to the length of your credit history during that time.

There are still valid reasons to close an account, such as avoiding an annual fee or reducing the temptation to overspend. Before closing one, consider how losing that available credit could affect your overall utilization.

If you keep an older card open, monitor it for unexpected activity. You might use it for one small recurring expense and set up automatic payments.

Myth 4: Credit Can Be Fixed Overnight

The truth: Real, lasting credit improvement is a gradual process, and that's okay.

If you've seen ads promising to "fix" your credit overnight, be cautious. There's no legitimate shortcut that instantly erases accurate negative history. What does work is consistency.

Some changes can appear relatively quickly. For example, paying down a card balance may help once the updated amount is reported. Rebuilding after missed payments or establishing credit with a limited history will usually take longer.

A more dependable approach is to:

• Bring overdue accounts current
• Make every payment on time
• Reduce revolving balances
• Dispute inaccurate information
• Avoid unnecessary credit applications
• Continue those habits consistently

You have the right to dispute inaccurate information on your credit reports at no cost.

Myth 5: You Need Perfect Credit to Qualify for Loans

The truth: You don't necessarily need a flawless credit history to be considered for financing.

Lending decisions consider more than a single number, and requirements vary by loan type. A lender may also review income, current debts, the requested loan amount, and other parts of your financial picture.

This is where working with a community bank really shines. Instead of being one anonymous application in a giant national queue, you get to talk with a real local lender who can look at your full picture and help you understand your options, including personal loans as one potential tool, depending on your needs.

If a home is your goal, our mortgage team can walk you through what to expect, too.

Approval and loan terms cannot be guaranteed, but an early conversation with a lender can help you understand the process and identify steps that may strengthen your financial position.

Talk to a Lender at AbbyBank

6 Habits That Can Help Build Stronger Credit

Once you understand the myths, you can focus on habits that support your credit over time:

1. Pay every bill on time. Payment history is typically one of the most influential credit-scoring factors. Set up autopay (or even payment reminders) for at least the minimum, so you never miss a due date.
2. Keep credit card balances low. Aim to use only a manageable portion of your available credit, make payments on time, and pay the full statement balance whenever possible.
3. Keep older accounts open. Length of credit history helps your score, so think twice before closing a long-held card.
4. Apply for new credit only when you need it. Avoid applying for multiple types of credit in a short period. If you’re rate shopping for a mortgage or auto loan, keep similar applications within a focused timeframe to help limit the impact of hard inquiries.
5. Review your credit reports regularly. Look for incorrect balances, unfamiliar accounts, and inaccurate late payments.
6. Be patient and consistent. Small, steady actions add up to real progress.