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Four Horribly False Credit Score Myths

Financial Goals

Ok, I get it…this credit score stuff is complicated.  Members of the media get it wrong.  Politicians get it wrong.  Heck, even employees of the credit bureaus get it wrong.  So back by popular demand it’s yet another edition of my credit score myths.  This week we’ve got four more, with two of them coming from a big name.

Paying Your Bills Well Before The Due Date Will Improve Your Credit Scores More Than Paying Closer to The Due Date

Source – Unknown

This one suggests that you will earn more credit score points by paying your bills well in advance of your due dates instead of waiting until the last few days to send a check or pay online.  And while it’s certainly a good habit, it’s not going to do anything for your credit scores.  In fact, credit scores have no clue when your lenders receive your payments.

Let’s try something.  Claim your three credit reports at  It won’t cost you a dime so you can leave your credit card in your wallet.  Now look at all of the active accounts such as credit cards, auto loans, student loans and mortgages.  Do you see anything that indicates WHEN your payments are due and WHEN the lenders are actually receiving your payments?  The answer is no and that’s the reason this myth is, in fact, a myth.

Credit Scores Are Based On How Much Debt You Have, Not On How Well You Handle Money

Source – Dave Ramsey

I’m sure the people at FICO were shocked to hear that their core product is based on how much debt you have and not how consumers handle money.  This is, of course, incorrect and you really need nothing more than an elementary understanding of credit scoring to stamp this as a myth.

All credit-scoring systems, not just FICO, are what are referred to as “multivariate”, which means they consider a variety of information to calculate a score.  There is no one item that determines your credit scores.  In the FICO system your indebtedness counts for 30 percent of the points in your score, which means 70 percent of your score points have nothing to do with your debt.  In the VantageScore system your indebtedness counts for 32 percent of the points in your score, which means 68 percent of your score points have nothing to do with your debt.

Further, under both of those scoring systems your “payment history” accounts for between 28 percent and 35 percent.  Point being, how well you handle money is a key factor used to base your credit scores.

People Who Are Debt-Free Do Not Have a Credit Score

Source – Dave Ramsey

The exact quote follows the previous myth and can be found all over the Internet.

“Credit scores are based on how much debt you have, not on how well you handle money. So, debt-free people like me don’t even have a credit score.”  This insinuates that you have to have debt in order to have a credit score because people who are debt-free don’t have credit scores.  Anyone, anyone?  You guessed it; that statement is absolutely incorrect.

You can have a credit report completely void of debt (of any kind) and still have a credit score.  In fact, you don’t even have to use credit in order to have a credit score, and a darn good one.  All you have to have is at least one account on your credit report and you’re likely to have a score.  That account can have never had anything but a $0 balance and, yes; you can still have a credit score.

NOTE: I sent Dave Ramsey’s Public Relations department a request for comment.  This was their response…

You’re right. Dave’s original quote was incorrect. Here is his new quote: “Credit scores are based on how you interact with debt, as FICO’s own website shows. It is not a reflection of net worth, income, or whether you are winning with money. So, many debt-free people like me who have ceased having any interaction with debt – no credit cards, car payments, mortgages, etc. – have an indeterminable credit score, or a credit score of zero,” said Ramsey.

Kudos to the Ramsey camp for being flexible enough to recognize their error and offer a correction.

Credit Scores Are Used by Employers for Pre-employment Screening

Source – Seems like everyone

I’ve called this the “myth of the decade” in some of my interviews.  It is perpetuated by members of the media and has become by far the most common myth re: credit scores.  In fact, I had to dispel it last Sunday on FOX.  You can watch it here if you like.

The truth is employers do not use credit scores.  They’re not even available to employers so it’s impossible for them to be used for employment screening.

The problem is the terms “credit score” and “credit report” are used interchangeably as if they’re the same thing when, in fact, they’re drastically different.  A credit report is the data.  The score is the grading of that data and not a permanent part of the credit report.

Credit REPORTS can, in fact, be used for employment screening in most states.  But even then it’s not the same credit report that your lenders have access to and it’s not the same as the credit reports that you have access to.  The credit reports used by employers are a special variation of the credit reports sold by the credit bureaus.  And, you guessed it, that special variation is not scored.

The credit reporting agencies and their trade association, the Consumer Data Industry Association (aka CDIA) have gone on record time and time again confirming the credit reports they sell for employment screening do not contain credit scores.  And, countless background screening companies have echoed the same thing.  So, while you may have to be worried about your credit report the next time you apply for a job, you can stop worrying about the score.

John Ulzheimer is the President of Consumer Education at, the credit blogger, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of or Intuit. Follow John on Twitter.

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