We are led to believe so many myths and false information about money. The credit industry is FULL of these myths, so allow me to try to dispel a few of them. Well, 13.

Myth: Improving your credit score is too difficult

While there are no doubt some more complicated cases out there, for most consumers, credit should be very straightforward. You don’t have to perform financial gymnastics to build and maintain a credit score, just learn the basics and stick to them.

• What to Focus On: Pay on time! 35% of the credit score mix is payment history. And stay away from maxing out your credit cards, as you want to keep your utilization as low as possible (under 30%). This factor accounts for 30% of the scoring mix.

Myth: You need an 800+ credit score for the best rates

To secure the best rates from most lenders, you want to aim for a score above 740. Don’t get me wrong, to achieve an 800+ is quite the feat. 800+ actually represents “perfect” credit, and tells a lender you are super unlikely to default on a loan. But 740+ will work just fine to get your hands on most types of loans at a great rate.

• For the overachievers: If you really want to go for the 800+, you must demonstrate excellent credit behavior for several years. That means no missed payments, utilization around 5-10%, minimal “hard hits/inquires”, and no other derogatory marks on your credit.

Myth: Closing credit card accounts can hurt your score

Can closing credit accounts hurt your score? Yes, it’s possible. But it really depends on your overall credit history. Closing an account can temporarily lower your score because by closing, you are lowering the amount of available credit in your name. However, the amount and the age of the account is of most importance. If for example, you have $100,000 in available credit, closing an account with a $1,000 limit is not going to have much impact; it’s only 1% of your total available credit. Closing an $20,000 account on the other hand is a much bigger chunk of your available credit. The age also matters and closing older accounts will hurt more since the scoring model likes to see a *long* and healthy credit history.

• What to do: If the account you no longer wish to use is a credit card that charges an annual fee, it may be best to just close it. It’s likely not worth paying a fee to keep it open. If the card doesn’t have a fee, consider just cutting the card up and keeping the account open so the available credit helps your score.

Myth: The more accounts you have, the better your score

Being able to handle a mix of credit is important, as it’s 10% of the credit score mix. But, that doesn’t mean you need to go crazy with opening a bunch of accounts. While a college student, I had a 750+ credit score by just having two credit cards and nothing else! I built it purely by paying on time and keeping my utilization low. You don’t need 15 credit cards to build a healthy score. In fact, opening too many credit accounts too quickly can hurt your score.

• Less can be more: Focus on just a few different accounts that you can manage with full control. Keep utilization between 10%-30%, and pay on time. Also, keep “hard inquiries”, which occur when you open new accounts, to less than two within a 2-year period.

Myth: Checking your score is enough to monitor your credit

Your credit score is meant to give you a snapshot into the health of your credit, but it doesn’t tell you everything. A credit score is based off the activity that you would find on your credit report. Credit reports should be checked at MINIMUM once a year, but ideally on a quarterly basis. They should be reviewed for accuracy in personal information, account balances and history, and account status. If something is jacked up on your credit report, that will have a direct impact on your score.

• A new habit: Focus less on the score, and get into the quarterly habit of checking your report. You are entitled to a free report, from each of the major bureaus, once per year. That means one free report from Experian, Transunion, and Equifax each year. An easy routine is to pull a different report every four months, which would cover all three bureaus in a year. Go to annualcreditreport.com to retrieve them for free.

Myth: It doesn’t matter how much you charge, as long as you don’t max out

It definitely matters! While you certainly want to avoid maxing out your credit cards, you also want to keep utilization under 30%. That means, if you have a $1,000 credit card limit, avoid charging more than $300. This is because credit utilization accounts for 30% of the credit score mix, and overusing credit can lower your score.

• How to increase your score: Keep your credit utilization LOW! Under 30% is the standard, but go for 10% or less! Keep in mind, available credit works both ways. To achieve low utilization, you can either keep your charges low, and/or increase your available credit.

Myth: You only have one credit score

Oh no, you have many. The score you pull either through your bank, or free service like Credit Karma is what’s referred to a “educational” credit score. It’s to help you roughly gauge your credit health, but it’s not necessarily what a lender will use. Actually, there are dozens or even hundreds of credit scoring models out there, and each lender is using a different one. Each model weighs factors slightly differently which can impact how they score you. There’re also different scoring models depending on the industry. The mortgage industry, for example, uses a specific scoring model that you would never be able to pull as a consumer. Levels to this!

• Be aware: There’re multiple models, but don’t let this frustrate you. Just understand that the score you see may be higher or lower than the score your lender is looking at. Use the score you have access to as a means to track your monthly or quarterly trend. Just don’t think it’s exact.

Myth: You should check your credit score all the damn time

The nice thing about credit scores is that you can check your own score as many times as your heart desires, without consequence. When you check your score, there’s no impact to your score. It’s just a waste of time. There’s no real reason to check your credit score every day, or even every week. The score naturally fluctuates as the weighted factors are constantly fluctuating wjile the algorithm recalculates. To check it too often will only end up causing you to worry about every little upward and downward tick, that may not indicate something has gone wrong.

• A healthy frequency: Check your credit report and score on a quarterly basis. If you must, you can view your score for free each month, but checking it more than that is pointless. Just notice overall trends like if you are going in the right direction each month, and how to keep that momentum.

Myth: Credit scores measure your financial health or wealth

Your credit score helps a lender to determine how much they can trust you with their money. That’s it. Credit scores don’t measure your net worth, savings, salary, investment portfolio balance, or anything else. If you can pay your bills on time and refrain from overusing credit cards, you have a pretty good shot at having a good credit score. But doing this alone doesn’t mean you are financially healthy overall. You still need to get out of debt, save an emergency fund, and invest towards the future. Having a healthy credit score is an important part of the complete financial health puzzle, but it’s only one piece.

• Check out this post: In “Stop Overthinking Your Credit Score” I make the case for why a credit score is nothing to lose your mind over. Learn the game, build the score, and then focus on the true indicators of wealth.

Myth: You should use a “credit repair” company to dispute a credit issue

Look, most credit repair companies mean well, but, many of them do what you can do yourself. A striking 80% of credit reports have some type of issue, and this is something you can address yourself. Check your reports regularly and dispute anything that doesn’t seem correct. This could be accounts that aren’t yours, false delinquencies, inaccurate personal information, or accounts that should be closed but show as open.

• How to dispute: Visit the websites of each of the three major credit bureaus (TransUnion, Experian, Equifax) and follow their dispute process. It won’t cost you a thing to dispute potentially false information, just your effort. It may take a couple months to get it all cleared up, but stay on them and be sure to check your credit report after 60 days to ensure corrections have been made.

Myth: Carrying a credit card balance helps your credit score

This actually came up in a class I was teaching a year or so ago. A participant mentioned that they were keeping a balance on their credit card in order to “help” their score. Oh no no no, baby, what is you doin!? You do NOT need to carry a balance in order to help your score. In fact, that can get you in even more trouble as you are now paying unnecessary interest.

• This is what matters: You want to use your credit card, as you’ll get “points” for an active account in good standing. But, don’t unnecessarily carry a balance. Pay the balance in full each month to not incur charges and to keep your utilization low.

Myth: Credit score monitoring subscriptions are “worth it”

No. Just no. I cannot think of one reason why would it be worth it to purchase any type of plan that provides your credit score. By now, there are multiple means to get your credit score for free; you don’t need to pay. Not to mention, you have to consider the cost/benefit tradeoff of paying for a credit score. One purpose of wanting a higher credit score is to save money by getting lower interest rates. So why pay a monthly monitoring fee to ultimately try to save money?

• How to get your score for free: Check with your bank or credit union as many of them offer a FICO or Vantage Score as a free service. Also, check out this post for other options.

Myth: Debt-free people shouldn’t use credit

We should all aspire to be in the #debtfree community. But, just because you finally climb out of the hole doesn’t mean you should stop using credit. Even if it’s just an occasional credit card charge, you should maintain an active credit history. The credit score algorithm considers recent activity. So, if you stop using credit, your score will start to fall due to inactivity.

• Do this instead: Keep your score nice and high by making a small charge each month and then paying it off in full. Pack of gum, gallon of gas, or a recurring monthly bill like Netflix.