12 Myths About US Credit History That Immigrants Believe

Where the myths come from

In most countries our clients come from, credit history works differently or barely affects anything. In the US it is the opposite: it decides the rate on a car loan, an apartment, insurance and even a phone on installments. A person enters a new system, nobody explains the rules, and they collect advice from friends. Some of this advice is outdated, some is only half true, and some simply does harm.

If you are just figuring out how a score works, start with the article what a credit score is and the breakdown what a score is made of. Then move on to the myths.

Myths about the score and checks

Myth 1. If you check your score, it will drop

This is the most persistent myth. When you look at your own report or score in a bank app or a credit monitoring service, it is a soft inquiry. Only you see it, and your points do not change because of it. Only a hard inquiry can lower the score — when a lender checks you based on your application for a card or a loan. More — what a hard inquiry is.

Myth 2. Every person has one score

There are many scores. There are different models — FICO and VantageScore, each has several versions, and each of the three bureaus has its own data. So in a bank app you see one number, in monitoring another, and a mortgage lender names a third. That is normal. How the models differ — in the article FICO vs VantageScore.

Myth 3. The score from a free app is what the bank sees

Free apps often show a VantageScore from one or two bureaus. For major applications, banks usually look at FICO, and auto lenders and mortgage lenders use their own industry versions. The difference can reach dozens of points. So before an important application it is better to look at the report from all three bureaus, not at one number from an app.

Myths about cards and debts

Myth 4. To build history, you need to leave a balance on your card

Many people are advised «not to pay the card off in full so the bank sees you are using credit». This is not true. The bank sees that you use the card when there is a small balance on the statement date — and you can and should pay it in full before the due date. A balance you carry adds not a single point, but you pay interest, and high utilization lowers the score. How it works — in the guide utilization and the statement date.

Myth 5. It is better to close a card you do not need

Closing a card often makes things worse. You lose its limit, and utilization on your other cards goes up. And if the card is old, the average age of your accounts may decrease over time. There are situations when closing is still worth it, for example with a high annual fee, but it is better to decide while looking at the whole report.

Myth 6. Paid a debt — the entry disappeared

Payment changes the status of an entry but does not delete it. A late payment, charge-off or collection stays on the report for up to 7 years, just marked as paid. This matters to a bank: a paid debt looks better than an unpaid one. But the history of the late payment itself does not go anywhere. The exception is some medical debts: under the bureaus' rules, paid medical collections are removed from the report. More — what paying a collection changes.

Myth 7. A debit card also builds history

No. A debit card spends your own money, it is not credit, and nothing about it goes to the bureaus. History is built by credit cards, including secured ones, loans, installment plans and authorized user status. How to start from scratch — in the article how to build a credit history in the US.

Myths about income, work and family

Myth 8. A big salary means a high score

Income is not part of the credit score at all. A person with a $200,000 salary and one late payment can have a lower score than a courier who has paid on time for five years. But income matters to the bank separately: it decides what limit you get and whether a large loan will be approved. So income is stated honestly on applications.

Myth 9. A husband and wife share one score

In the US, every person has their own credit history, even in a marriage. A wedding does not merge reports. Only the accounts you opened together or where one added the other become shared. A late payment on a joint loan will land on both reports.

Myth 10. If you have no debts, your history is excellent

Having no debts and having no history are different things. If you buy everything with cash and have never taken credit, the bureaus simply have no data, and the bank sees an empty report. To the bank this is uncertainty, not reliability. That is exactly why many immigrants with money get denied.

Immigrant myths

Myth 11. Your history from home will move to the US

Credit bureaus in the US do not receive data from other countries automatically. A good history in Kyiv, Yerevan or Almaty is not visible here. There are separate programs that help take a foreign history into account when applying at some banks, but it does not get into the three-bureau report. You have to build your history over again.

Myth 12. A bad history is forever

Almost any negative item loses weight over time, and most entries leave the report after 7 years. A fresh late payment has more impact than a three-year-old one. And inaccurate, outdated or unverified entries can be disputed. So even a difficult history can be gradually repaired if you stop making new mistakes. Which negative items have the biggest impact — in the article how much negative items affect your history.

What really affects your history

Take away the myths and a simple picture remains. The score is most affected by on-time payments and how much of your limits you use. Then come the age of accounts, new applications and the mix of credit. There are no secret tricks here: pay on time, keep balances small, do not submit applications in bunches and look at your report regularly.

• Look at your three-bureau report at least once every 1–2 months — it does not lower your score
• Pay every bill on time, preferably through autopay
• Keep the balance small on the statement date
• Do not close old cards without a reason
• Do not submit several applications in a row

If your score is lower than it should be, the reasons are usually visible in the report itself. We collected the most common ones in the article why your credit score is low.

How Excalibur helps you sort it out

During the free review, an Excalibur Credit Solutions manager looks at your three-bureau report and explains in simple words what is good in it, what gets in the way and what of that can be fixed. If there are inaccurate, outdated or unverified entries, after payment our technical team works with the bureaus. If your history is thin, the manager will tell you about credit lines. Results are individual.