Debunking Common FICO Myths and Misconceptions

Coffee cup and credit score paperwork.

The following is presented for informational purposes only and is not intended as credit repair.

While you probably know what a FICO® Score is, there may be a cloud of confusion over how it’s calculated, how to build good credit, and how it ultimately affects your life as a consumer. Don’t worry, you’re not alone. It turns out that there are pervading misconceptions about FICO Scores that just won’t die.

We’re here to turn that around.

The most common myths about FICO Scores, debunked:

Myth 1: You Have Only One FICO Score

It turns out that you actually may have dozens of FICO Scores. The same goes for the VantageScore®, or any score for that matter, explains credit card expert John Ulzheimer, formerly of FICO and Equifax.

“The FICO is a brand, not a specific score,” says Ulzheimer. “And there are many different scores. Afterall, there are three credit bureaus and several generations of FICO's scoring software still in use today.”

These different scores may be used for different purposes. For instance, there are versions used for when you apply for an auto loan (i.e., FICO Auto Score 8), in credit card decisioning (i.e., FICO Bankcard Score 8), and for mortgage lending (i.e., FICO Score 2).

Ulzheimer further explains: “So when someone says, ‘My FICO Score is 700,’ that’s only as accurate as saying, ‘One of my FICO scores is 700 as of right now.’ “

Myth 2: A Credit Score is Part of Your Credit Report

When you order a credit report, your score isn’t actually an official part of the report. That’s why you’re not entitled to annual free credit scores like you are with credit reports, which you can get one for free from each of the three credit bureaus within a 12-month period, explains Ulzheimer.

“Credit scores, regardless whether it’s the FICO or VantageScore, are an add-on product sold along with a credit report,” says Ulzheimer. “Think about leather interior or heated seats as an upgrade to a car.” That’s why oftentimes there’s a fee you have to pay to get your credit score.

While there is typically a fee, these days many credit card companies and credit monitoring services offer a “free credit score.” Even though they are promoted as being free to you, the consumer, the company offering the free score is paying for them in some form, explains Ulzheimer.

Myth 3: FICO Scores are Used to Determine Premiums on Insurance

While credit scores can determine your terms and rates on car loans, mortgages, credit cards, and the so forth, they aren’t a factor in setting the premium on homeowners insurance and auto insurance. “Many insurance providers do leverage credit information in the decision process in granting insurance, but not FICO scores, which are designed to predict credit risk, not insurance risk,” says Tommy Lee, principal scientist at FICO.

Instead of using credit scores, lenders oftentimes look at credit-based insurance scores to assess how likely someone will have an insurance loss. That’s because research reveals a correlation between credit-based insurance scores and losses.

Myth 4: FICO Scores are Used During the Employment Screening Process

Here’s the difference: Credit reports can be used during the employment screening process when you apply for a job, but the credit scores themselves are not included on those types of reports, explains Ulzheimer.

“This is a hard one to kill,” says Ulzheimer. “So many people use the terms ‘credit score’ and ‘credit report’ interchangeably, which is why the myth persists.” Remember: a credit report is record of your credit history, whereas a credit score is an algorithm used to determine your credit risk and creditworthiness.

Myth 5: Your FICO Score Factors in Your Income

Another common misconception is that the FICO® Score considers your income. The truth is that verified income is not found in the credit report, explains Lee. The same goes for the balances in your checking and savings accounts, and other assets, such as how much you have sitting in your retirement nest egg.

If you’re confused as on what the score is based on, look no further than your credit report. So think revolving loans, such as credit cards, and installment loans, such as car loans, mortgages, and personal loans.

Myth 6: Married Couples Share a FICO Score

Married couples do not share credit scores or credit history. “Each partner has their own distinct credit report,” says Lee. “The only credit obligations that show on your report are those you signed up for, including those you had before you got married.”

However, if you add your spouse an as authorized user on your credit cards, while they aren’t responsible for making payments, the account will most likely will show up on their credit report. So if you’re making on-time payments, it could help build their credit score. Conversely, if you’re late, it could ding their credit.

Myth 7: You Have to Carry a Balance on Your Credit Cards to Build a Credit History

Carrying a balance on your credit card—and not paying off your balances in full each month— to build your credit history is simply false, explains Lee.

“Carrying balances from month to month and incurring interest fees does not help your score,” says Lee. “ Instead, what matters is that you are keeping the balances reported in your credit file—typically your credit card statement balances—relatively low, especially in comparison to your credit limits.”

So how can you build your credit history and boost your score? As your payment history makes up 35 percent of your credit score, be careful not to make any late or missed payments. You’ll also want to keep your debt-to-limit, or credit utilization ratio, low. That’s because the second most important category in the FICO® Score calculation is your “amounts owed,” which makes up some 30 percent of the score calculation. You can use the FICO Score Planner to learn tips and tricks to reach your target score. You can also work with a nonprofit credit counseling agency to review your credit report and determine an action plan to improve your credit health over time.

How FICO score is calculated

Curious to know what goes into your FICO Score? Well, there are multiple credit scoring models, including different versions of the FICO Score, so the calculation will change slightly depending on the model being used. That said, for most FICO scores there are five key elements included in the calculation:

  • Payment history (35%): This includes the last seven years of payments. It's a big part of your score, which is why even a single missed payment can bring your score way down.
  • Amount Owed (30%): The amount of debt you're carrying relative to your available credit is also a major factor in your score. If you spend up to your credit limit, you may risk hurting your score.
  • Length of Credit History (15%): The longer you've been using credit successfully, the better it is for your score. Avoid closing old accounts or opening too many new accounts to preserve your score.
  • Recent Inquiries (10%): Making too many recent attempts to open new credit accounts may hurt your score, at least temporarily.
  • Credit Mix (10%): It helps your score to have experience with a variety of credit products.

No matter what the credit scoring model, it plays a huge role in determining your purchasing power as a consumer. If you have questions about your FICO® Score and how you might improve it, MMI offers in-depth credit report reviews.

Tagged in Understanding your credit report, Build your credit score

A corporate headshot of Jackie Lam.

Jackie Lam is an L.A.-based personal finance writer who is passionate about helping creatives with their finances. Her work has appeared in Forbes, Mental Floss, Business Insider, and Bankrate. She's also a 2022 Financial Literacy and Education in Communities (FLEC) award winner. You can find her at

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