Money

Half of Americans get this key fact wrong about credit scores

While most people know what a credit score is, people also commonly misunderstand how it's put together. In a recent survey from the credit repair firm Lexington Law, for example, half of the respondents said they believe using your debit card affects your score — it doesn't.

"Debit cards are a tool used to complete a cash transaction. They do not appear in credit reports and so do not affect credit scores at all," Rod Griffin, director of consumer education and awareness at Experian, tells CNBC Make It.

Your credit score is calculated based on matters relevant to your credit report: payment history, how much you owe, the length of your credit history, the types of credit you have and how often you apply for new credit. Paying bills on time and keeping your balances low counts for about 65 percent of your score.

A high score can get you a competitive rate on a loan or determine whether you qualify for a loan at all. FICO scores range from around 300 to 850. An excellent score is one of 750 or above, while anything below 650 is problematic.

Credit vs. debit

Consumers often prefer credit cards because, when used responsibly, they can help you build your score, earn you rewards on your purchases and offer helpful perks and protections.

But it is smart to use debit in certain situations, like when using credit would incur a fee, or if you're in credit card debt already and you don't want to keep losing money to interest payments.

That said, debit cards come with their share of fees too, something 37 percent of survey respondents did not realize. "There are many types of fees that can be accrued through debit card usage, including PIN fees, overdraft fees, ATM card charges, minimum fees and international fees," reports Lexington Law.

Other prevalent credit card myths

FICO also wants consumers to be aware of some other prevalent,relevant myths since, in some cases, 43 million Americans have the wrong idea.

  • Your income does not affect your credit score
  • You do not share a score with your spouse until you open a joint account

And, as Ethan Dornhelm, vice president of scores and predictive analytics at FICO, tells CNBC Make It, "carrying balances from month to month and incurring interest fees absolutely doesn't help your score."

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