A strong credit score is a powerful financial tool, but it can be unclear. Many people think myths about credit are true. In reality, credit scores depend on specific data in your credit reports. Over time, new scoring models (like FICO® Score 10 and 10T) add trends and even Buy Now, Pay Later (BNPL) loans into the mix. Today, let’s debunk common credit myths of 2025 and explain what influences your FICO score today. You'll learn how to use facts (and tools) to stay on top of your credit without accidentally hurting it.
A common credit score misconception is that everyone has a single universal credit score. In truth, you have many credit scores, not just one. There are three major credit bureaus (Experian, TransUnion, Equifax), and each one can produce a different FICO® Score for you. This happens because each bureau may have slightly different information about your accounts. For example, one lender might report your newest credit card to Experian first, so TransUnion's data may be slightly outdated. FICO's scoring models at each bureau are similar but not identical.
Also, FICO isn't the only scoring company. There are alternative scores like VantageScore. These use similar credit report data but run different formulas. Your score might be 720 under FICO at Experian but 735 under VantageScore or at a different bureau. In short, expect variation.
The important thing is to look at all of your scores. Checking each bureau's report (for free once a year or through a credit monitoring tool) allows you to spot any discrepancies. If one report has an error or missing account information, correcting it can improve the score at that bureau. Remember, lenders often check scores from more than one bureau, so managing all three reports is key.
Another myth: "If I earn more money or have a big job title, my credit score will be higher." This is false. FICO scores never use your income, salary, occupation, job title, or employment history. In fact, by law, credit scoring models are prohibited from considering personal traits such as race, religion, age, and even one's place of residence. The logic is straightforward: credit scores are designed to assess how you manage credit rather than your demographic profile or income.
That doesn't mean lenders ignore income. Banks and lenders will ask about your income when you apply for a loan (to judge whether you can pay it back). However, the FICO formula itself does not include a slot for salary or title. In practice, a person with a high salary can have a low score if they have late payments or high debt. Conversely, a person with a modest income can achieve a high score by consistently paying on time and keeping balances low. So focus on the real FICO score factors (like payment history and credit usage) – your income level has no direct effect on the score.
You may have heard, "You should carry a small balance on your credit card to build credit." This is a myth. Carrying a balance (especially paying interest) does not improve your score. It can cost you money. FICO only cares about whether you pay at least the minimum on time, not whether you owe something.
Here's how it works: Your card balances influence a factor called credit utilization (how much of your available credit you use). Even if you pay off your card every month, the reported balance is what counts. To keep utilization low, consider paying down the card early in the billing cycle.
That way, the balance reported to bureaus is small or zero. Paying in full each month saves interest and keeps utilization low – both of which help your score. In short, don't feel you must carry a debt to "prove" you have credit. Simply using the card responsibly and paying it off on time is enough to build credit. Carrying a balance will only rack up interest, not points.
Checking your credit score or report is a soft inquiry, and it does not lower your score. Soft inquiries include the ones you do yourself when companies make you a pre-approved offer or even when employers do a credit check. None of those count in the FICO calculation.
By contrast, a hard inquiry is when a lender checks your credit to approve a loan or card. Hard pulls can shave a few points off temporarily, but even those effects fade in a few months. So feel free to use credit monitoring tools or check your free credit reports regularly.
Experts advise reviewing your reports from each bureau at least once a year. Catching mistakes or identity theft early can improve your score. Just remember: checking your score with services like 3 Credit Scores or the free annual report is a safe practice. It will never harm your score.
Closing a credit card account may seem like responsible behavior, but it can impact your credit score. Why is that? FICO considers your total available credit and the age of your accounts. When you close a card, you lose that credit limit, so your utilization ratio may go up (because you have less total credit to spread your balances across). Also, closed cards eventually drop off your report, which can shorten your credit history. A shorter average account age can lower your score.
Many people are unaware that even closed accounts with no missed payments can remain on their credit report for up to 10 years, still contributing to their credit age. FICO's older-age scoring factors consider both open and closed accounts, so simply paying off and closing a card doesn't immediately impact your history length. But as that old account eventually disappears, the age factor can worsen.
Close cards only if you must (for example, a card with a high annual fee). Otherwise, keeping a paid-off card open often helps maintain a higher credit limit and a longer credit history.
Paying your bills on time is critically important – in fact, it makes up about 35% of your FICO score – but it's not the whole story. Even a perfect payment history won't yield an excellent score if other factors are lacking. For example, if you owe a significant amount or have numerous new inquiries, your score can suffer despite making on-time payments.
Paying late hurts you, but keeping balances reasonable, maintaining old accounts, and not opening too many new accounts at once are also key. For example, if you pay on time but max out your credit cards, the high utilization can negatively impact your score. Similarly, frequently closing and opening cards can signal risk. To strengthen your FICO score, handle all these parts well – not just the payments.
It sounds scary, but old negative marks on your report don't last forever. A debt in collections or a late payment will "fall off" your credit report after about 7 years (counted from the first missed payment). Once it's off your report, it no longer affects your FICO score. That means you can eventually get a fresh start, even if you had serious debt in the past.
On the other hand, some old accounts are beneficial. Long-standing credit accounts with a clean history boost your credit history length and credit mix, which helps improve your score. A longer credit history is generally better for your score. For instance, a credit card you opened years ago (and kept in good standing) will show a long, on-time payment record, helping your score even if you don't use it often.
So, "old debt" is a mixed bag: unpaid negatives eventually go away, and old positive accounts can improve your score by providing stability. The key is to make on-time payments, manage debts effectively, and understand that any negative marks are temporary.
Credit score rules change over time. FICO rolled out its Score 10 family a few years back, and by 2025, it will push even further. The biggest shift is a version called 10T, where the "T" stands for trends. Old scores examine your accounts on a single day; 10T tracks how your balances and payments have changed over the last two years. Think of it as a short movie instead of a single photo. If you sometimes run up balances but quickly pay them off, the new system treats that as positive behavior. Yet if your debt keeps creeping higher month after month, the score will notice and subtract more points.
Another 2025 change focuses on Buy Now, Pay Later (BNPL) plans. FICO says it will launch FICO Score 10 BNPL and FICO Score 10T BNPL in autumn 2025. These versions pull in data from providers such as Affirm to show whether borrowers handle "pay-in-four" installments responsibly. Until now, most BNPL activity has never appeared in credit reports. With the update, making BNPL payments on time can help improve your score, while missing them can harm it. FICO claims the added information will help lenders judge real risk and give reliable borrowers more credit at better rates.
It's worth noting that these new versions will sit alongside older scores. For now, most lenders still use FICO 8 or other older versions. That means your score likely won't jump dramatically when these models roll out – in fact, most people see less than a 20-point change in score under the new models. The bottom line is that nothing has fundamentally changed about what matters most. You still need to pay bills on time, keep debt low, and use credit wisely. The new FICO scores (10, 10T, and their BNPL variants) analyze your behavior a bit more deeply.
Your FICO credit score is calculated from data in your credit reports. The main real factors are:
Payment history (35%) – Whether you pay your bills on time or miss payments. On-time payments boost your score; even a single late payment can hurt it.
Credit utilization (≈30%) – How much of your available credit you use? This includes your credit card balances and other revolving debt. Aim to keep balances below roughly one-third of your combined limits; paying down cards before the statement closes is an easy way to lower this number.
Length of credit history (≈15%) – How long your credit accounts have existed? This includes the age of the first account and the medium age of all accounts. A longer history indicates experience; a shorter history (for new users) yields lower scores.
Credit mix (≈10%) – All credit accounts you have (credit such as cards and installment loans such as auto or student loans, etc.). A mix of installment and revolving accounts is good, but it’s a small factor. You don’t need every type of credit, but having different accounts in good standing can help.
New credit (≈10%) – The number of recently opened accounts and hard inquiries. Opening several new accounts in a short time can signal risk. Each new credit application or multiple credit pulls can lower your score slightly.
Other data, such as public records (bankruptcies, which are rare) and collection accounts, are also part of these categories. The key takeaway: Focus on building a long history of on-time payments, keeping balances low relative to limits, and only opening new credit when needed. These are the real drivers of your FICO score.
Regularly checking your credit file is a free, safe, and smart practice. Federal law grants one free report per year from Equifax, Experian, and TransUnion, and the bureaus now let you pull them weekly on AnnualCreditReport.com with a soft inquiry that never affects your score. Review each section—accounts, balances, personal data, inquiries—looking for errors or signs of fraud.
Dispute any wrong late payments, unfamiliar accounts, or incorrect addresses immediately; bureaus must investigate within 30 days, and successful corrections can quickly raise your score. If you stagger your requests—say Equifax in January, Experian in May, TransUnion in September—you get year-round coverage without paying a cent. Pair this habit with free score alerts from your bank for continuous protection and daily peace of mind.
Beyond pulling reports yourself, consider using free credit monitoring services to stay updated automatically. Many banks and apps (like Credit Karma, Capital One's CreditWise, or the bureaus' services) send email or text alerts when important changes occur. For example, Credit Karma's monitoring will notify you if a new credit account is opened or a hard inquiry appears on your TransUnion or Equifax file.
Experian's free monitoring also issues alerts for new inquiries, accounts, or changes to personal data. These alerts mean you don't have to log in constantly – the service tells you when action is needed. Early alerts let you catch fraud or mistakes ASAP (so you can quickly dispute them). In short, sign up for free monitoring and keep notifications on. Whenever you see an alert, review the change on your report; if it appears incorrect, investigate and correct it immediately.
When applying for credit, do so only when you need it. Each hard inquiry (from a loan or card application) can shave a few points off your FICO score, and inquiries stay on your reports for up to 2 years. Don't spread out applications unnecessarily – try to submit any similar applications within a short window. Credit scoring models recognize "rate shopping."
For example, if you're shopping for an auto loan, mortgage, or student loan, multiple inquiries within a 14–45-day period will usually be counted as just one inquiry for scoring purposes. (Newer FICO scores use a 45-day window for grouping mortgage, auto, or student loan pulls; older models used 14 days.) VantageScore even uses a 14-day window for all loan inquiries. By contrast, applying for several credit cards one after another doesn't bundle the same way – each card pull typically counts separately.
To minimize impact, get prequalified or "soft-pulled" offers first (they don't affect your score), then apply only to the best fits. And if you do need multiple loans, submit those applications as close together as possible. That way, even if each one generates a hard pull, FICO and Vantage will group them (reducing the hit). Remember: a single hard pull usually only drops your score by a few points, and the effect fades within months. But multiple hard pulls spread out can add up, so plan your applications carefully.
It's not just about score – it's also about keeping thieves out of your reports. Consider placing a fraud alert or even a credit freeze on your files. A credit freeze means lenders cannot open new accounts in your name unless you thaw it; it is free to place and remove and does not affect your credit score.
An initial fraud alert (also free) tells creditors to verify your identity before approving new credit, and it also entitles you to extra free reports. Both freezes and alerts are enforced by law and incur no cost. If you suspect identity theft or just want extra security, these tools keep you informed – any attempt to open credit in your name will require permission, so you'll know immediately if someone tries.
Pay promptly: Your payment track record carries the greatest weight in FICO calculations. Enable automatic drafts or set phone alerts to guarantee every bill is posted before its deadline. Since a single delinquency can severely damage your scores, make punctual repayment your top priority.
Maintain modest balances: Carrying hefty amounts on credit cards relative to their credit limits inflates your utilization ratio, a metric that can negatively impact your ratings. Strive to use no more than roughly 30 percent of your aggregate limit. Clearing card statements in full each cycle completely preserves a strong score and eliminates interest charges every time.
Avoid unnecessary new credit: Only open new cards or loans when you genuinely need them. Opening several accounts in a short time can signal risk to lenders. Each new account also lowers your average account age, which can slightly lower your score.
Monitor unused accounts: If you have old credit cards or accounts you’re not using, don’t forget them. Check that no one has charged or used those accounts without your knowledge. Close unused accounts only if keeping them open truly serves no purpose – closing a card can raise your utilization if you transfer balances.
By following these habits, you can proactively manage your credit profile without having to pull reports obsessively. In short, use the free tools and alerts available, fix any errors you find, and practice smart credit behaviors. That way, you stay fully informed and protected, and you never harm your score in the process.