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How Much Do You Know About Credit and Credit Score?

Aaron Crowe
credit and credit score

A recent survey conducted by Credit Sesame revealed that many people still have a lot to learn about credit and credit score.

The survey asked respondents to indicate whether the following statements are true. Do you know the right answers?

  1. True or false? Any adult lawful US resident can build a credit score.
  2. True or false? Saving regularly improves credit score.
  3. True or false? Credit score is affected by education level.
  4. True or false? Paying cash is the best way to improve credit score.
  5. True or false? Three credit cards with low balances are better than one with a high balance.
  6. True or false? Job title and salary has no impact on credit score.
  7. True or false? Credit bureaus are owned by the government.
  8. True or false? Lenders use credit score to evaluate ability to repay loans.
  9. True or false? Only rich people can get credit.

Myths can be hard to shake, and sometimes get mistaken for facts. No, George Washington didn’t have wooden teeth. Your mother was wrong when she said you should wait 30 to 60 minutes to go swimming after eating because otherwise you’ll get cramps. And dogs aren’t color blind.

The same goes for many things you may have heard about credit and credit score. A look at the facts behind some credit myths can help point you toward the truth.

TRUE Any adult lawful US resident can build a credit score

59% said this is true and it is TRUE. This means 41% did not know.

Any U.S. resident 18 or older can have a credit card, and even without a credit card they can build a credit score. New immigrants may need to take two basic steps before they can build credit scores:

  • Apply for a Social Security number because credit card issuers and banks frequently ask for this number when applying for a credit card or loan. If you can’t get a Social Security number, get an Individual Taxpayer Identification Number, or ITIN, from the Internal Revenue Service.
  •  Open a bank account in the U.S. This won’t affect your credit score or appear on your credit report but a bank account may be required to apply for a credit card.

FALSE Saving regularly improves credit score

27% said this is true, but it is FALSE.

Credit scores are computed only from information on a consumer credit report. Savings and checking account balances aren’t reported to the credit reporting agencies because they don’t involve debt or borrowing. A savings account can be used to pay down debt, though withdrawals won’t be listed on your credit report.

FALSE Credit score is affected by education level

9% said this is true, but it is FALSE.

This is a myth. Your education level isn’t listed on your credit report, and has no bearing on credit scores. Your level of education may correlate with your credit score, but that doesn’t mean it affects your credit score. A 2017 study found that the more education someone has the more likely they are to save more and have better financial management skills.

FALSE Paying cash is the best way to improve credit score

6% said this is true, but it is FALSE.

Paying in cash instead of using your credit card isn’t the best way to improve your credit score. The best way is to pay down revolving credit balances by making more than the minimum payment each month. This will reduce your credit utilization rate, which measures how much of your total credit limit is being used. Paying your credit card bills and other bills on time is the best way to improve your credit score because payment history accounts for 35% of a FICO credit score.

TRUE Three credit cards with low balances are better than one with a high balance

40% said this is true and it is TRUE. This means 60% did not know.

This statement is true for a few reasons when it comes to your credit. The first is it will likely improve your credit utilization rate because you’ll likely have more credit available to you with three cards than you would with one. Assuming the total balance is the same in either scenario, you’ll probably have a higher credit limit with three cards than with one. That means you’re using less of the overall credit you have available.

Having balances on three credit cards is also better because having multiple cards shows you have a credit mix and can be an indication that you can manage them. However, having more than two or three major credit card accounts can be a sign that you’re relying too much on credit and may be in financial trouble. Keep the balances low, or pay them off each month, and your credit and credit score should improve.

TRUE Job title and salary have no impact on credit score

16% said this is true and it is TRUE. This means 84% did not know.

As a way to confirm your identity, your employers may be listed on your credit report. But your job title, salary and how long you’ve worked at each company are not shared with the credit reporting agencies, and this doesn’t impact a credit score. Lenders may request this information from you, but it isn’t given to the three main reporting agencies: Experian, TransUnion, and Equifax. Employment history is never factored into your credit and credit score, mainly because your employer has nothing to do with the way you’ve managed credit and debt.

FALSE Credit bureaus are owned by the government

7% said this is true but it is FALSE.

The three main credit bureaus — Equifax, TransUnion and Experian — are private, for-profit companies. They are not controlled by the federal government. They’re governed by two federal agencies — the Federal Trade Commission, and the Consumer Financial Protection Bureau — that make sure they don’t violate any U.S. laws, but they aren’t owed by the government.

TRUE Lenders use credit score to evaluate ability to repay loans

60% said this is true and it is TRUE. This means 40% did not know.

This is one of the main reasons lenders check applicants’ credit scores. They interpret a low credit score as a sign that borrowers won’t repay a loan, while those with high scores are more likely to repay it, and to repay on time. But it isn’t the only thing they consider when approving a loan. Lenders also often want to see payroll stubs, tax returns, statements from student loans and other loans, and other financial information.

FALSE Only rich people can get credit

2% said this is true but it is FALSE.

Thankfully, anyone can get credit. A high income can help someone qualify for a credit card if they have low enough debts, but if not they may have the same difficulties getting credit that anyone else would have. 

Being rich doesn’t guaranteed a higher line of credit. However, updating your income with your credit card issuer can lead to a credit limit raise, which can improve your credit utilization ratio. But otherwise, the wealthy will have to do the same things anyone else does to raise a credit score: Pay their bills on time, use no more than 30% of their available credit, keep credit accounts open for years, have a mix of credit types, and limit the number of credit accounts they’ve recently opened.

Credit and credit score aren’t complicated. Building your credit is straightforward. Separating falsehoods from the truth about credit can help you make the right moves to improve your credit score and get the most out of your money.


Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.


Survey methodology

The Credit Sesame Personal Finance and Credit Survey May 2022 was designed and executed by Credit Sesame using the Momentive Inc. survey tool. General population data was collected online May 20-21, 2022. The survey sample comprised 1,222 U.S. residents aged 18 to 99 years balanced for age and gender using U.S. Census data. The sample data is accurate to within +/- 2.888 percentage points using a 95% confidence level.

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Published June 17, 2022 Updated: June 23, 2022
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