Common Credit Score Misconceptions

Marshall Rathmell |

People we meet with constantly ask about factors that affect their credit. Most have heard things that may or may not be true, so we wanted to shed some light on a few of the more common credit misconceptions out there.

Will personally checking my credit drop my score?

The answer to this question is no, personally checking your credit score or report will not typically hurt you. Using resources such as Credit Karma to check credit are considered soft inquiries and will not harm your score. On the other hand, hard inquiries, which are typically made when you apply for credit, can reduce your credit score.

Closing old accounts that I no longer use is a good idea, right?

Probably not for purposes of credit score maximization. When you close old accounts that are no longer in use, you also lose the limit associated with those accounts. This can negatively affect your credit utilization rate which is simply your outstanding balances divided by your total credit limit across all accounts. If credit limits go down because you close accounts, but balances remain the same or increase, your utilization will increase, which can significantly impact your score in the wrong direction. Also, if you close an older account, it could also reduce the average age of your accounts which can also reduce your credit score.

If I co-sign on another person’s account it will affect their credit not mine, correct?

The purpose of requiring a co-signor on an account is to reduce the risk taken on by a creditor in the event of a default by the primary borrower. Based on that, it is logical to believe that the co-signor would take on some legal responsibility, and that is the case. Anything negative that happens with the account may not only be reflected on the primary borrower’s credit report, but also on the report of the co-signor.

Once we get married, will we share the same credit score?

This is not the case. Each person, even if they share the same last name, has his or her own credit score. Each score is based on the accounts in each individual’s name, and both should be checked for accuracy and mistakes on an individual basis.

If my spouse has sub-par credit and I add them as a joint account owner to one of my accounts in good standing, will it reduce my credit score?

No, adding someone with less than stellar credit will not in and of itself negatively affect your account (unless they run up a lot of bills that you can’t and don’t pay). Adding them will more than likely help improve their score (potentially increase utilization, the total number of accounts, average account age, etc.), but it should not hurt your score.