Credit scores govern major milestones in adult life: renting an apartment, securing a car loan, buying a home, and sometimes even passing background checks for employment. Yet, misinformation surrounding how credit scores operate is rampant among college students. Let's debunk the five most destructive myths.
Myth 1: Checking your own credit score lowers it
Many students avoid checking their credit reports out of fear that looking will hurt their score. Checking your own credit is classified as a soft inquiry and has zero impact on your score. Only hard inquiries, triggered when a lender evaluates your credit because you formally applied for a new loan or card, affect your score.
Myth 2: You need to carry a balance to build credit
As covered previously, leaving a rolling balance on your credit card does not help your score; it only forces you to pay unnecessary interest to the bank. Pay your full statement balance every single month.
Myth 3: Closing old credit cards helps your financial profile
People often think closing an unused credit card cleans up their accounts. In reality, length of credit history accounts for 15% of your score, and closing an old card shortens your average account age while shrinking your total available credit limit, causing your utilization ratio to spike.
Myth 4: Income directly impacts your credit score
Your salary or allowance has zero direct mathematical bearing on your FICO score. A student earning $15,000 a year with immaculate payment habits will maintain a higher credit score than a corporate executive earning $300,000 who regularly misses payment deadlines.
Myth 5: All credit cards are created equal
Subprime credit cards aimed at college students often bundle hidden monthly maintenance fees and setup charges. Always look for reputable no-annual-fee student cards or secured cards.