7 Credit Score Myths That Will Still Surprise You

Published

April 12, 2018

Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter.

Surprise! Consumers are still confused about what goes into a credit report and a credit score. Given how opaque these things were for such a long time, it’s entirely predictable that confusion reigns. It’ll be that way for a while. Credit bureau TransUnion recently released a survey with more proof that the mythology built up around credit reporting will take a long time to undo. Heck — one in four Americans reportedly think the sun revolves around the Earth, so fixing this will take a while.

The myth that I think will be hardest to beat back is the notion that income or assets have anything to do with credit reporting. They don’t, even if they should. You might have $1 million in the bank, or have just landed a huge raise, but you’ll be denied a credit card if your credit score is low or you have a “thin” credit file.

TransUnion found that about half of American adults think a pay raise increases their credit score. And even people with good credit are confused about what goes into that good credit.

Among the findings from TransUnion’s online survey of about 1,000 people:

Payments affecting credit scores: Nearly half of respondents falsely identified rent (45%) and cellphone (47%) payments as directly affecting their score; yet, these aren’t regularly reported to credit bureaus.
Information in credit reports: Among survey respondents who checked their credit report in the past 30 days, half mistakenly believe their full employment history (55%) and income level (41%) are included in their reports.
Consumers with “good” or “excellent” credit were confused: 49% of those with “excellent credit” mistakenly thought rental payments are included in their report.
Pay raises: Nearly half (48%) of respondents who’ve checked their credit report in the past year incorrectly believed an increase in income improves their score.
Credit inquiries: 40% of respondents who’ve never checked their report are unsure how checking it affects their score, and 20% who checked their report in the past year mistakenly believed checking their report would decrease their score.
Paying down debts: 61% of those who checked their report in the past 30 days erroneously believed paying off debts from late payments automatically increases their score.
Trended information: 70% of those who’ve checked their report in the past year incorrectly assumed that it reflected recent changes or trends in their finances over time.