Americans’ Top Misconceptions About Credit Scores

Understanding how credit scores work can be a critical component of financial health. Credit may affect the ability to buy a home, borrow money, or even get a job. But many Americans hold misconceptions about credit that may be holding them back from improving their credit scores or making better financial choices.

New analysis from a Capital One Insights Center survey found that Americans across age ranges, credit score groups and gender hold the same top two credit misconceptions. But, overall, most survey participants who believed those misconceptions did not have a high degree of confidence in their answers, which suggests fertile ground for additional, targeted financial education.

Key findings

• Nearly 70% of Americans incorrectly believe that having too low of a credit score will prevent them from qualifying for any type of credit card. This was the top misconception overall and among the top two across age ranges, credit score groups and gender. 

• About two-thirds (68%) incorrectly believe that paying your utility bills on time can improve your credit score. This was the second-highest misconception overall and among the top two across age ranges, credit score groups, and gender. 

• Overall, 37% incorrectly believe that carrying a balance on your credit card each month is a good way to increase your credit score. What’s more, this misconception grows stronger with each generation.

• Over a quarter (28%) incorrectly believe that hard credit checks by a business or company cannot affect their credit score. Another quarter (25%) said they “don’t know.” Hard credit checks happen after consumers apply for credit and differ from soft credit checks for things like background checks and pre-approval offers for credit cards. 

• Roughly one quarter (27%) incorrectly believe that checking their credit will negatively affect their credit score. Another 19% said they “don’t know.”

On a positive note, most respondents know that credit scores can be rebuilt, that making credit card payments on time can improve their credit score, and that only making the minimum payment on a credit card means they will owe interest on the remaining balance. These correct beliefs were also the top three questions where respondents were most confident in their answers.

This analysis relies on self-reported data collected from a nationally representative survey of 3,502 Americans, conducted in July 2022. The survey asked respondents to identify whether statements about credit were definitely false, probably false, don’t know, probably true, or definitely true in order to capture the accuracy and confidence of their beliefs. 

Researchers then identified the top misconceptions by age group, credit score group (using VantageScore groupings), and gender. 

Note: all data in this report is from self-reported, anonymous research of U.S. consumers broadly, not specifically from or about Capital One customers or employees.

A closer look

Credit can be confusing and complicated, and credit scores can vary depending on how and when they’re calculated and what goes into different scoring models. So it is no surprise that people hold misconceptions about credit. But those misconceptions can affect their financial well-being. 

Here are the top 4 misconceptions overall:

1. Having too low of a credit score will prevent you from qualifying for any type of credit card. 

Survey results show that nearly 70% of respondents believe this misconception, though it is generally false. Among those respondents, roughly a third (32%) had high confidence in their responses, indicating that this misconception holds relative weight. This belief may keep people from applying for a credit card, although they can help consumers build credit, protect against losses from fraud, and serve as a lifeline in financial emergencies.  

2. Paying your utility bills on time can improve your credit score.  

About two-thirds (68%) of respondents believe this misconception, though it is generally false. Among those respondents, more than one quarter (27%) were highly confident in their answer. This misconception was held more commonly among Baby Boomers and those in the Silent Generation. 

Most utility companies do not report payment histories to credit bureaus. And not all credit scoring companies consider bill payment information. Falling behind on payments, though, may lower your credit score if your account is turned over to a collections agency. And some lenders are turning to alternative data, like on-time utility payments, to determine loan eligibility. 

3. The major credit bureaus all base their scores off the same information.

About half of respondents (51%) believe this misconception. But the three major credit bureaus–Equifax, Experian and TransUnion–may collect information from different sources when creating a credit report, which can result in subtle differences in your credit scores. Those who believe this misconception might not know to check credit reports from all three major credit bureaus.

4. Regardless of whether they’ve had a credit card, everyone 18 and over in the United States has a credit score.

Forty-two percent of respondents answered incorrectly. Not everyone has a credit score. Roughly 45 million Americans do not have enough of a credit history to determine a credit score, which limits their ability to get a loan. 

In addition to the top 4 misconceptions, the survey revealed other misconceptions that might negatively affect Americans’ ability to manage their credit.

About 41 percent of Americans incorrectly believe that a spouse’s credit affects their own credit score. Credit histories and scores are not combined. But how you and your spouse make financial decisions together could affect both of your credit scores–for example, if you have a joint credit card.

Overall, 37% incorrectly believe that carrying a balance on their credit cards each month is a good way to increase their credit score. What’s more, this misconception grows stronger with each generation.

This misconception could be harmful if consumers purposefully avoid paying off their credit card in full and begin to accrue interest on their debt. Carrying a balance each month can also lead to higher debt utilization rates, which can hurt credit scores. 

Over a quarter (28%) incorrectly believe that hard credit checks by a business or company cannot affect their credit score. Hard credit checks can lower your credit score, usually by just a few points, because credit-scoring models generally look at how recently and often you’ve applied for credit. 

Roughly a quarter (27%) incorrectly believe that checking their credit will negatively affect their credit score. Another 19% said they “don’t know.” Those who hold this misconception or are unsure may not be monitoring their credit score or checking to see if their credit report is accurate. These soft credit checks do not affect credit scores. Consumers might benefit from targeted education about hard credit checks vs. soft credit checks and how both affect their credit score.

In general, respondents did not have a high degree of confidence in their incorrect answers, so this survey may shed light on areas of focus for more targeted financial education. Americans’ understanding of credit is elastic and capable of growth, especially if bolstered with the right tools. 

Methodology

The Capital One Insights Center Credit Beliefs Survey is a nationally representative survey of 3,502 randomly selected adults in the United States conducted in July 2022. In the survey, respondents were shown a series of statements about credit and credit scores and asked to rate whether each statement is definitely false, probably false, don’t know, probably true, or definitely true.

Using these responses, we were able to understand whether respondents believed that a statement about credit was true or false (their accuracy), as well as how much confidence they had in their answer. To measure accuracy, we calculated how many respondents correctly identified each statement as true or false. Confidence levels were determined based on whether respondents answered either “definitely true” or ”‘definitely false” on the five-point scale. Combining this with whether the statement was true or false allowed us to understand respondents’ confidence in their correct or incorrect beliefs.

Respondents were also asked about essential elements of the credit system, including the names of major credit bureaus, what the typical credit score is in the United States, and information about their personal credit history and profile.

Our survey sample was representative of the U.S. population across several dimensions. For the purposes of this analysis, we segmented data by credit score groupings, generation/age groups and gender. Generational indicators follow industry standards set by Pew Research Center. 

Credit score groupings follow the VantageScore Credit Scores ranking system: 781-850 scores are coded as “Excellent,” 661-780 as “Good,” 601-660 as “Fair,” 500-600 as “Poor” and 300-499 as “Very Poor.” Because a smaller number of respondents fell in the “Poor” category, we combined “Poor” and “Very Poor” to ensure the band was statistically significant. We also collected data from respondents with no credit scores. Credit scores are based on the values reported by respondents. 

About the Capital One Insights Center

The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology. 

Disclaimer 

This material has been prepared by the Capital One Insights Center, a non-partisan center for objective research and insights, and is provided solely for general information purposes. Unless otherwise specifically stated, any views, analysis or opinions expressed herein are solely those of the Capital One Insight Center’s staff, researchers and listed partners (if applicable) and may differ from the views and opinions expressed by Capital One Financial Corporation, other departments or divisions of Capital One Financial Corporation, or its affiliates and/or subsidiaries (Capital One). Information has been obtained from sources believed to be reliable. 

The data relied on for this report are based on self-reported survey data from anonymous respondents across the U.S. Survey respondents included may or may not have relationships with any number of financial institutions and/or products. Capital One Insights Center does not know, nor is it able to determine, if any of the survey respondents have a relationship with Capital One. Certain information herein is also based on data obtained from third-party sources believed to be reliable. 

Analysis and conclusions constitute the Capital One Insight Center’s judgment as of the date of this report and are subject to change without notice. Furthermore, the analysis and views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. 

Any opinions expressed herein should not be construed as an individual recommendation for any particular customer or client and is not intended as advice or recommendations of particular securities, financial instruments, market conditions or strategies. Capital One Financial Corporation and its affiliates and/or subsidiaries may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.