#160: You can't turn on the TV or have a conversation with someone about money without the subject of credit scores coming up. With all that awareness you would think that everyone would have a basic understanding of how credit works. Unfortunately, there is a lot of miss-information being spread around. There are many myths surrounding the credit score; believing these myths can not only wreck your finances, but keep you from reaching your financial goals. For more information, visit the show notes at https://moneyplansos.com/biggest-credit-score-myths-and-alsicebucketchallenge-mpsos160/ The five biggest myths about credit scores Myth #1 - You have to carry a balance to have a good credit score This is a dangerous myth that gives people an excuse to keep their debts. The five credit score factors (payment history, amount owed, length of credit history, new credit, and types of debt) are all about how well you "manage" debt. If you pull your credit report there is nothing about how you manage your normal bills (electric, cell phone, rent), unless you are late on those payments. Myth #2 - The credit scoring system is a government run program The government has nothing to do with credit scores! Can you imagine the chaos?! Credit scores are monitored and reported by publicly and privately held companies that turn a profit. Myth #3 - You need a credit score to rent an apartment Rent payments do not show up on your credit score, why should you need a credit score to rent? Some apartment complexes will only look at your credit history when considering you as a tenant. Others will pull a background check and pull your credit report to look for negative information. There is no rule or law that you must have a credit score in order to rent. Myth #4 - A good credit score will help you build wealth A credit score is based on debt, debt products and the ability to pay back the debt. It won't help you build wealth, but it can help you get a better interest rate on even more debt. Myth #5 - The more you borrow, the better your score To a point, this is true. But the credit score is based on ratios of available credit vs. balance owed plus payment history. By borrowing too much you can tip that scale and cause the credit score to drop. This is why many people say that you should use a credit card but just pay it off at the end of the month. If we simply avoid debt in the first place, we can use that money to save and invest. These goals are much easier to accomplish when you don't have the extra weight of debt hanging around. Call to Action Base your financial decisions on long term goals. Don't get distracted by the lure of a good credit score. Remember that a credit score is based on debt and debt products. To be financially fit we need to consume less, save more, and pay attention - not interest. Also on the show My friend and past podcast guest, James Kinson, accepted the ALS Ice Bucket Challenge.