FICO® scores: 3 myths debunked

Failing to understand how your FICO® scores are calculated can be costly. Although it’s not the only thing lenders look at, the scores calculated by the nation’s three major credit-rating bureaus can make or break your loan request, or at the very least increase the cost of borrowing.

Yet myths about how these important scores are calculated persist, potentially keeping borrowers from getting higher credit ratings – and lower interest rates.

Here are three myths – and realities -- about FICO® scores:

Myth: Closing old or paid-off accounts will increase my score, especially if I open new accounts.
Truth: Old accounts in good standing generally benefit your FICO® score. They show you have a long history of managing credit, particularly if you pay off the balances or keep them low. What’s most important is to stay well below the credit limit, regardless of the age of the account. And be reasonable about the number of credit cards and accounts you maintain.

Myth: My score will go down if I shop around for a loan.
Truth: If you’re shopping for a mortgage or an auto loan, multiple credit inquiries for the same type of loan within 14 days won’t affect your score. The formulas used by the three major credit bureaus recognize you are shopping for the best rate. However, if you’re shopping for a mortgage one month and an auto loan two or three months later, your FICO® score could take a hit.

Myth: I don’t need to check my FICO® scores if I pay my bills on time.
Credit reports often contain errors that can bring down your score. The only way to know the information is accurate is to check your credit report yourself. You can get one free credit report a year from each of the agencies: Equifax, TransUnion and Experion Group Ltd. Keep in mind that the free credit report does not give you your FICO® score. You can get all three of your FICO scores at  You can also easily get your free VantageScore 3.0© credit score from

Fair Isaac, the company that developed the FICO® score formula, had made changes in 2008 meant to better predict risk. The occasional delinquency will count less, but patterns of delinquency or other problems will count more.

Old formula or new, the basics remain the same. A solid record of paying bills on time and avoiding becoming overextended is your best path to getting and keeping a good FICO® score.



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