Credit scores and credit in general come with a lot of misinformation. Just like the debates around credit cards, advice about how credit works is all over the place. Some swear off credit cards entirely, while others claim keeping a balance is the way to go.
To clear things up, let’s break down some of the most misleading and risky credit card myths once and for all.
#1: Using Only Cash or Debit Protects Your Credit Score
If you’ve never had a credit card, you might think the best way to safeguard your credit score is to avoid borrowing altogether. The idea sounds logical—less debt should mean a better score, right?
Not quite.
Paying for everything with cash or a debit card won’t lower your credit score, but it won’t help it either. A credit score isn’t based on how little credit you use—it’s built on how well you manage the credit you have. Lenders want to see a track record of responsible borrowing, and that comes from using credit and making payments on time.
One of the biggest factors in your credit score is your payment history, which makes up 35% of your FICO® score. The more on-time payments you make, the better your score becomes. A strong credit history can make it easier to qualify for loans and mortgages with better interest rates, potentially saving you a significant amount of money over time.
There’s another perk to using a credit card: rewards. Whether it’s cash back, points, or travel miles, credit cards often come with benefits that put money back in your pocket. With cash or debit, once you spend your money, it’s gone—no rewards, no perks.
#2: Too Many Credit Cards Will Lower Your Score
A common belief is that having multiple credit cards will damage your credit score, but that’s not exactly true. Some people assume that fewer cards mean better credit, just like others think avoiding credit altogether is the best approach.
In reality, having more available credit can actually help your score—if you manage it responsibly. A major factor in credit score calculations is your credit utilization ratio, which compares your total credit card balance to your total available credit.
For example
if you have one card with a $1,000 limit and a $200 balance, your utilization is 20%. But if you have two cards with a combined $2,000 limit and the same $200 balance, your utilization drops to 10%. Lower utilization is better, and experts recommend keeping it under 30%.
Since credit utilization makes up 30% of your FICO® score, spreading your spending across multiple cards—or simply having higher credit limits—can help keep that ratio low. A high utilization rate can signal financial risk to lenders, so keeping it in check can improve your credit profile over time.
Opening New Credit Cards the Right Way
While having more available credit can be beneficial, there are a few things to keep in mind when applying for new cards.
Avoid Applying for Several Cards at Once
Every time you apply for a credit card, the lender runs a hard inquiry on your credit report. One or two won’t have much of an impact, but several in a short period can cause a noticeable dip in your score. Lenders might see multiple applications as a red flag, assuming you’re in financial trouble.
Since new credit makes up 10% of your FICO® score, those with shorter credit histories will feel the impact of multiple applications more than those with a long-established credit profile. To be safe, it’s best to space out applications by at least 30 to 90 days. If you’re newer to credit, waiting closer to 90 days is a safer bet.
Responsible Credit Card Habits Matter More Than the Number of Cards
Having multiple cards won’t help if you don’t manage them well. The most important rule? Always pay your balance on time and in full. Late payments will hurt your score far more than the number of cards in your wallet. If you treat your credit cards as tools for spending—not as loans to carry balances—your score will reflect that.
Be Aware of Card Issuer Rules
Different banks have restrictions on how many new cards you can open within a certain timeframe. One well-known example is the Chase 5/24 rule, which prevents you from getting a new Chase card if you’ve opened five or more credit cards (from any issuer) in the past 24 months.
Business and personal cards often follow separate rules, so understanding these policies ahead of time can help you plan your applications wisely. Instead of applying at random, it’s best to have a clear strategy for building your credit card portfolio.
#3: Carrying a Balance Helps Your Credit Score
This one comes up a lot, and believing it can be an expensive mistake. Some people, including a few so-called financial experts, claim that keeping a small balance on your credit card boosts your credit score. That idea couldn’t be further from the truth.
The smartest way to use a credit card? Pay the full statement balance on time every month. No exceptions.
Carrying a balance doesn’t do anything to help your credit score. What it does do is rack up unnecessary interest charges, late fees, and potentially damage your financial standing. Over time, this can cost you thousands of dollars and make it harder to qualify for loans or mortgages when you need them.
The best approach is simple:
Pay your balance after the statement closes but before the due date. This way, your payment gets reported to credit bureaus, helping to build a strong credit history without wasting money on interest.
#4: Closing Unused Credit Cards Helps Your Score
Many people assume that shutting down an old credit card will somehow boost their credit score. This idea likely stems from the belief that using as little credit as possible is the best way to maintain strong financial health. In reality, closing a credit card can actually hurt your score.
There are two main reasons for this:
- It Lowers Your Available Credit
When you close a credit card, your total available credit shrinks. If your spending habits stay the same, this pushes your credit utilization ratio higher—a factor that makes up 30% of your FICO® score. For example, if you have a $2,000 total credit limit and a $200 balance, your utilization is 10%. If you close a card and your limit drops to $1,000, that same $200 balance now puts your utilization at 20%, which can negatively impact your score. - It Shortens Your Credit History
Credit age accounts for 15% of your score. This includes the age of your oldest account, your newest account, and the average age of all accounts. The longer your credit history, the better. Closing a long-standing credit card lowers the average age of your accounts, which can drag down your score. The older the card, the bigger the impact.
When Does a Closed Account Stop Affecting Your Score?
Credit scoring models handle closed accounts differently. Under the FICO model, positive accounts can remain on your report for up to 10 years, while negative accounts stay for seven years. With VantageScore, closed accounts may disappear sooner, meaning your score could take a hit earlier than it would under FICO.
Should You Ever Close a Credit Card?
Only if absolutely necessary. Two common reasons people close accounts are:
- The annual fee costs more than the benefits you’re getting.
- You need to separate your finances from someone else, such as after a divorce.
If high fees are the issue, consider reaching out to the card issuer. They might offer a retention bonus, waive the fee, or allow you to switch to a no-fee card. Closing a card should always be the last resort.
#5: Checking Your Credit Report Hurts Your Score
A lot of people avoid checking their credit score because they think it will lower their rating. The truth is, looking at your own credit report won’t affect your score at all. What does matter is how the check is performed.
When a lender reviews your credit as part of an application for a credit card, loan, or mortgage, they perform a hard inquiry (also called a hard pull). This can cause a small, temporary dip in your score, but it usually bounces back within a few weeks.
If you’re shopping around for a mortgage or auto loan, multiple hard inquiries from different lenders within a short period may be grouped together as a single inquiry. This prevents your score from dropping too much just for comparing rates. That said, this doesn’t apply to credit card applications—applying for several cards at once can lead to multiple hard inquiries, which could have a bigger impact.
On the other hand, a soft inquiry (or soft pull) happens when you or a company checks your credit report for non-lending reasons. This could be a background check by an employer, a pre-approved credit offer, or simply checking your own score. Soft inquiries have no effect on your credit score.
If you want to check your credit without affecting your score, free services like Credit Karma and Credit Sesame can provide updates. Just be cautious—some sites may try to upsell unnecessary paid services, so never enter your card details unless you’re sure what you’re signing up for.
Timing Matters When Applying for New Credit
Even though a single hard inquiry has only a minor effect, it’s something to think about if you’re preparing for a major financial move like buying a house. A slight drop in your score could mean a higher mortgage interest rate, which could cost you a lot over time. If you’re planning to apply for a mortgage or another large loan, it’s best to hold off on new credit card applications until after the deal is done.
Don’t Fall for the Hype
Misinformation about credit is everywhere, but the truth is pretty simple—your credit score reflects how well you manage borrowed money. The better your track record, the stronger your score.
You can’t prove you’re responsible with credit by avoiding it altogether.
So, the next time someone insists that credit cards are bad, claims you have too many, or suggests closing old accounts, take a step back. Think about how those choices might affect your financial future.
And if anyone tells you to carry a balance to boost your score? Ignore them. No lender rewards you for throwing money away on interest. Paying your bills on time, every time, is what really counts.
