6 Credit Score Myths Debunked

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - July 5, 2021

Repairing your credit score starts with understanding how your score is generated, and being able to discern myth from fact. Let’s clear the air with some well-known myths to get you on the correct path to credit repair, and resources for bad credit borrowers in need of a car loan.

What’s a Credit Score?

When a lender or creditor talks about your credit score, odds are, they’re talking about your FICO credit score that’s a three-digit number between 300 and 850. FICO is the most commonly used scoring model. There are others – they use similar categories but with different ranges. Since FICO is the most referenced one, we’ll be debunking myths surrounding this credit scoring model.

Your FICO credit score is made up of five categories:

  • Payment history – 35%
  • Amounts owed – 30%
  • Length of credit history – 15%
  • New credit – 10%
  • Credit mix – 10%

Now that you know the five categories of the FICO credit score, let’s break down some myths surrounding these categories.

MYTH 1: Checking your own credit score harms it.

Entirely incorrect! You are not punished for checking your own credit score or reports. Checking your own credit score is reported as an inquiry, but it’s a soft inquiry and doesn’t harm your credit score at all. Other soft pull examples include an employer looking at your credit reports during a hiring process, or a promotional offer from a lender.

In fact, you have the right to check your credit reports every 12 months for free from all three credit bureaus (Experian, TransUnion, and Equifax). Right now, due to the pandemic, you can request your credit reports from www.AnnualCreditReport.com every week until April 2022 without paying a dime. After April 2022, it’s slated to resume as annual free access.

MYTH 2: My credit got killed by multiple credit pulls!

This myth is both true and false – it depends! It’s true that you can lose around five to 20 points per credit pull, but there’s actually a strategy called rate shopping that minimizes this impact if you apply for new credit of the same type with a few lenders, in a short period of time.

Say you head to a dealership and apply with their three lending partners to see if you’re eligible for an auto loan. Since all three lenders are auto lenders, and you applied with three all at once, only one hard inquiry harms your credit score. All three hard pulls are reported but you only experience the impact of one. The credit scoring models know that when you request the same type of credit multiple times within 14 days, you’re shopping for new credit.

MYTH 3: A good credit score is all you need for a loan.

This simply isn't true! If you apply for an auto loan and don’t have the income to repay the loan, you’re not likely to qualify. One of a lender's biggest concerns is your ability to repay the loan on time. While your credit history can tell a lot about how well you’ve repaid past credit, if you don’t have income, you may be out of luck in terms of getting approved for a car loan.

Having a good credit score can certainly widen your auto lender options and possibly determine which lenders you can apply with, but if you can’t meet their other requirements regarding income, debt to income ratios, down payment requirements, or prove your identity, then a good credit score is nothing but a number.

MYTH 4: No credit is the same as bad credit.

Untrue! Being called a no credit borrower is not the same as a bad credit borrower in a lender’s eyes. Traditionally, a bad credit borrower is one that’s had some missteps or situations that created a lower credit score, such as missed payments, repossession, or even accounts in collections. No credit means you either don’t have any active credit lines, or you’ve never taken on new credit before.

It’s true that a no credit borrower can have a lower credit score, and that’s largely due to a lacking payment history and thin file. However, lenders typically do look a little deeper to find the reason behind a lower credit score – and they can tell the difference between no credit and bad credit. Having no credit can create a poor credit score, but you may have more lending opportunities than a borrower with a tarnished credit history.

MYTH 5: Paying debts removes them from your credit reports.

False! Most accounts can stick around on your credit reports for up to seven years, and some bankruptcies can remain for up to 10 years. While paying off a collection account or loan means you’ve completed it, and shows you’re a responsible borrower, any positive or negative impact from those payments can remain for several years. Credit reports serve as a way for lenders and you to view your history as a borrower, so unpaid and paid accounts stay for a while and contribute to your credit score.

MYTH 6: You can’t get a car loan with a low credit score.

Incorrect! There are many resources available for bad credit borrowers looking to get into an auto loan.

Subprime lenders that are signed up with special finance dealerships are able to assist in many tough credit situations, even bankruptcy, past repossession, or even habitual poor credit. If you can meet the lender’s requirements, your credit score is only one piece of the puzzle in your overall eligibility.

Buy here pay here dealers also assist bad credit borrowers. Often, they skip the credit check entirely, meaning your credit score and credit reports aren’t even part of the equation. For these dealerships, your income and down payment are the biggest parts of your eligibility.

Ready for a Car Loan?

Repairing your credit score can start with taking on an auto loan you can handle. If the car loan and its on-time payments are reported, you can turn bad credit into good credit by handling the loan with care.

If you’re in need of a car loan but aren’t sure where to start, then start right here with CarsDirect. We’ve created a nationwide network of special finance dealerships that specialize in assisting borrowers with less than perfect credit. Fill out our free auto loan request form and we’ll look for a dealer in your local area.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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