SOURCE: Finn Law Group

According to a recent survey, roughly 25% of millennials do not understand what a credit score is. That’s a staggering statistic, for any number of reasons.

Above all, it’s remarkable to consider how much people tend to ignore their credit score, or else take it for granted – particularly given how much this numerical value can impact your ability to do everything from purchasing a vehicle, to starting a business, to buying a home.

Even among people who do have a more thorough grasp on their credit, there is often a certain level of complacency to be found. Many people assume they understand all of the ins and outs of their credit score and report, even though they may be basing their understanding on a major myth or misconception.

Credit be a mystery – but it doesn’t have to be this way!

Here are seven common credit myths you may hear in the wild, debunked:

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1.) “Checking Your Credit Will Always Hurt Your Score”

There is a common belief that checking your credit score can cause it to be reduced. But many leading experts and publications agree that this isn’t necessarily the case.

It all comes down to understanding the difference between “soft” and “hard” inquiries.

A soft inquiry occurs when you check your own credit score. Broadly speaking, this activity isn’t penalized, as it’s your own information that you’re accessing. To a certain extent, you’re supposed to be in the know about this information. Many credit and consumer protection experts agree that it’s important to regularly check your credit score, in order to make sure that the information contained is fully up-to-date and accurate.

A hard inquiry results from someone checking your score, in relation to a credit application. When a potential lender or service provider checks your credit report or score, this does result in a drop in your score. Usually, this decline is small and temporary.

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2.) “You Only Have One Credit Score”

As Forbes bluntly puts it: “You have more than one credit score.”

In fact, as that article goes on to note, it’s important to recognize that “most people have dozens of credit scores,” which result from “a myriad of scoring formulas applied to credit reports” from the major bureaus (i.e., Experian, Equifax, and TransUnion).

It’s also important to realize that, as Experian notes in a blog post:“lenders and others check your credit score for different reasons, and each formula looks at your credit history in a different way, giving different weight to various factors.”

In other words? Checking your credit score one time, from one source, may not give you the full story on your history, as these scores are complex, and consistently in flux. It’s important to understand your credit score and credit report as benchmarks, but recognize that one number in isolation won’t tell you everything you need to know.

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3.) “Closing a Credit Card or Account Will Help Your Score”

Does closing a line of credit cause your score to rise? It may seem like this would be the case, but most credit experts agree that it doesn’t necessarily work like this in practice. In fact, closing a credit card may actually lower your score, in certain circumstances (of course, it’s a complicated matter, and circumstances will vary from case to case).

Why is this the case? It comes down to a ratio, often referred to as the credit utilization ratio – a metric that plays a major role in determining a consumer’s credit score.

The gist of the matter is that most credit scoring models measure risk by how much credit you’re using, rather than how much credit you have available. Thus, when you close an account, you have less total credit available, and your utilization of your remaining credit goes up, which may negatively impact your credit score.

As The Balance explains:“A high credit utilization indicates that you’re likely spending a lot of your monthly income on debt payments which puts you at a higher risk of defaulting on your payments.”

Another thing to bear in mind? Not only does closing a line of credit impact your credit utilization percentage, but it also may impact your average credit age – another factor in determining overall credit score. If you close your oldest line of credit, for example, your average credit age could be significantly impacted. If you close a new line of credit, the benefit to your credit age may offset your increased utilization, in certain cases.

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4.) “Your Job and Income Directly Impact Your Credit Score”

A recent financial literacy quiz from a personal finance site asked 2000 consumers this question:“True or false – income does not impact your credit score.”

The correct answer is “true,” but only 40% of respondents got the question right.

The belief that your job title or income directly affects your credit score is a common misconception about credit. Your income may affect your ability to pay off your debts, but this is an indirect factor. Most consumer protection experts would agree that a “better” job or higher salary will not automatically translate into a better credit score.

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5.) “Marriage and Other Demographic Factors Impact Your Credit Score”

As with income, many people tend to believe that their personal, demographic information makes its way onto their credit report, and impacts their credit score.

It’s important to bear in mind that your credit reports and scores monitor your use of credit, and the way you manage your debts. They do not include demographic information, such as race, religion, profession, sexual orientation, or so on. Similarly, it’s important to remember that your credit score does not track your personal financial funds, so information pertaining to your bank accounts, investment accounts, or cash transactions does not impact your credit score, in most cases (the exception to this rule generally occurs when transactions result in debts that can be reported to collection agencies, such as unpaid banking fees).

Finally, credit experts like to remind consumers that their credit reports and scores are theirs, and theirs alone.

In other words, there is no “joint” credit score between married people. In most cases, couples applying for a line of credit together (such as a mortgage) will need to have both partners’ credit checked. In this scenario, a spouse’s good (or poor) credit will not always counterbalance the other partner’s credit score; couples typically won’t be able to just submit the higher score and hope for the best. Likewise, joint accounts – such as mortgage, a shared credit card, or a loan for a vehicle – will appear on both individuals’ credit reports, affecting both people’s scores, sometimes in differing ways.

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6.) “You Don’t Need to Worry About Your Score If You’re Not Applying for New Credit”

For many consumers, there is a temptation to adopt an “out of sight, out of mind” approach to their credit score. Their reasoning being that if they are not immediately concerned about getting a new mortgage, applying for a new credit card, or so on, then there is no real need to be concerned about their credit score.

But, as Credit.com puts it: “This is like saying you don’t have to worry about your weight because you don’t plan on going to the doctor anytime soon. Just because you don’t think you’ll be applying for credit soon doesn’t mean you should forgo maintaining good financial habits.”

For one thing, your credit score can impact many different personal and financial aspects of your life, from your ability to secure a new insurance rate to getting a new job.

Above all, though, it’s important to remember that staying on top of your credit is a key step in remaining financially literate. Failing to understand your credit could open you up to identity theft, or result in issues which could potentially take years to fully resolve.

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7.) “Your Credit Is Who You Are”

As Experian points out, many consumers tend to believe that there is an objective standard for “good” and “bad” credit scores. However, at the end of the day your score is just a numerical value, presented to lenders in order to help them evaluate how big of a risk it would be to lend to you.

Having a credit score lower than you’d like doesn’t necessarily cut you off from ever receiving a loan or making a big ticket purchase, though you may end up paying a higher interest rate, or having to put up a greater down payment or offer collateral.

Above all, financial pros tend to agree on point: Your credit score is not a value judgment on who you are, and shouldn’t be read as such.

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