When it comes to your credit score, believing the wrong information could literally cost you.

What Types of Credit Pulls Really Harm My Score?

Research shows that people who apply for new credit too frequently indicate a higher credit risk. For this reason, scoring models like FICO® factor in the number of inquiries on your credit reports, which leads some people to incorrectly believe that having your credit pulled automatically damages your score. That is not exactly the case — and here’s the scoop:
  • It is true that some inquiries can potentially harm your credit. Hard inquiries, like a lender pulling your credit report, could affect your score. But soft inquiries, like checking your own credit score, will not.For example: If you apply for numerous credit cards, then it will probably negatively impact your credit score. But if you have multiple credit pulls from mortgage companies, student loan providers, or auto lenders because you are rate shopping, then there might be a less substantial impact on your score because rate shopping doesn’t indicate an elevated credit risk — as long as multiple inquires occur within a small window of time (usually between 14 and 45 days).

Should I Close Paid-Off Credit Cards?

Another common credit myth is that paid-off credit card accounts should be closed. According to FICO, credit card accounts should never be closed for the sole purpose of raising a credit score. Closing a zero-balance credit card account often has the unintended effect of raising your revolving utilization ratio — or your available credit relative to your outstanding account balances.
When you close an unused account, the available credit limit is no longer factored into your revolving utilization. If you carry an outstanding balance on any other credit cards, closing a zero-balance account could result in a higher overall revolving utilization ratio, which in turn could cause your credit score to drop.

Is 30% the Magic Number for Credit Card Utilization?

When it comes to credit card utilization, a lower percentage is generally better. One credit scoring myth that has confused a lot of consumers over the years is the idea that 30% is the magic number for credit card utilization. According to FICO, that isn’t true.
If you want to have a healthy credit score, aim to pay off your credit card balances in full each month. Pay by the statement closing date, and you should see that the account balance on your credit report is reflected as zero — and note that a zero balance can lead to lower revolving credit utilization (and generally a better credit score).