The 5 biggest credit score myths that can hurt your finances

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Americans appear to have a handle on some credit scoring basics, according to a new Bankrate Money Pulse survey. But there are some more nuanced aspects of credit that still have many consumers confused.

It’s not necessarily their fault.

There is “a lot of opaqueness about how creditors look at the borrower’s profile and what is good and bad from a borrower’s standpoint,” says Joseph Toms , president of Freedom Financial Asset Management in San Mateo, California. To explain a lender’s point of view, he compares a person’s credit profile to a health physical.

A heavy cough, for instance, is an obvious sign of illness to anyone, but a doctor uses other subtle measures — such as temperature — to assess your overall health. Similarly, a missed payment clearly indicates you might not pay back a loan as agreed. But other subtle factors, such as the diversity of your credit profile, give prospective lenders a clearer picture of your financial stability.

To help you better understand the vital signs of your credit report, we debunk the most persistent credit score myths identified in our survey.