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Credit Score: 5 Common Myths

As important as your credit score is to your financial health, very few people truly know how their scores add up. And plenty of consumers get it wrong on the important questions, like how to raise your score or how long a black mark lasts.

MoneyWatch's Jill Schlesinger asked John Ulzheimer, president of consumer education for, to name the most common misunderstandings — and to tell us what will really hurt (or help) your score.

1. Paying Bills on Time Will Improve My Score

“That’s definitely a good start,” says Ulzheimer. “But it’s not the key to the kingdom.” With FICO scores typically ranging from 350 to 850, 35% of the points on your score are directly tied to whether you’re making your payments on time, says Ulzheimer. That leaves 65% of your score that has nothing to do with missed payments. “You cannot hang your hat on whether or not you are just making your payments on time, and assume you have fantastic credit” he says.

2. Carrying a Balance Is Good

“I’m quite sure the credit card industry started that [rumor],” Ulzheimer says with a chuckle. Although carrying balances will cost you in interest and financing charges, from a credit score perspective, there’s nothing wrong with carrying a balance on your credit card. But very large balances will affect your “creditization” — the percentage of your credit limit that you’re carrying as a balance.

Maxing out your credit cards will hurt your score. What you really want is a relatively low balance — never more than 15 percent of your overall limit.

3. HR Can See My Credit Score

Although a lot of people treat them as though they are interchangeable, credit reports and credit scores are two completely different things. Employers in most states can look up your credit report as part of a pre-employment screening (and during your term of employment) — but they do not have access to your credit score.

Who can see your score? Any lender, insurance company, landlord, or utility provider can buy your score from one of the three accredited credit report agencies. They use that score to determine the amount of risk they’re taking in doing business with you — then use it to grant or deny you, and to set the terms.

4. Foreclosures and Bankruptcies Stain Your Score for 7 Years

This one is partly true: Whether you face a short sale, a foreclosure or bankruptcy proceedings, you’ll have that black mark on your credit report for at least seven years. (A bankruptcy will actually be on there for 10.) But your credit score does improve as that item gets older; you just need patience and good behavior. And as a matter of fact, you can have a very solid credit score in three or four years. Just don’t fall back into the same bad habits.

5. Short Sales Are Better than Foreclosures

The assumption is that a short sale is actually better for your credit score than a foreclosure, but in reality, they have the same effect. It’s certainly better for the neighborhood than a foreclosure would be — someone is keeping the house clean, mowing the lawn, not ripping copper piping out of the wall — but from a credit-score perspective, there is no difference.

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