Greentext

There are a lot of bad answers or misunderstandings about credit scores in this thread.

FICO Credit scores measure exactly one thing: How good are you at regularly paying on debt over time? Thats it.

There are some other companies that take your FICO score and make their own determinations from it, but those are not the intended purpose of a FICO score.

ANON is also saying "x raises" or "y lowers" but he's missing one other part. Some of those raises and lowers are temporary meaning for a couple of months only, and those don't have years long impacts.

Most of the big moving pieces are publicly published right on the FICO website too, so you don't have to guess:

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So lets look at ANONs complaints through the lens of what FICO scores address:

Using credit lowers your score

I'm assuming ANON means "using a portion of an already established credit line." We can see in the chart that this would increase the red segment of the FICO score. FICO assumes the closer you get to your maximum credit availability, the more you're being squeezed financially reducing your ability to pay on all of your debts. From a lender's perspective, if your debts are piling up, then lending you more is a higher risk.

Not using credit lowers your score

If ANON means "using zero credit" then, yes, ANON wouldn't have a recent history of paying on debt then the Payment History section of the graph would be thin or empty. From a lender's perspective, if you haven't paid on any debt in the last 6 months, how do they know you still have the ability to do so if you want credit right now?

Paying back late lowers your score

Absolutely! Its violating the very purpose FICO is made to measure: How good are you at regularly paying on debt over time?

Paying back early lowers your score

This one is a yes or no depending on what scenario ANON is talking about. Paying back a credit card early DOES NOT lower your score. In fact, it would likely RAISE your score. Paying back an installment loan, lets say for a car, early can lower your score, but not because its early, but because the load will disappear. Without a loan to pay on, you will have less recent history of paying on an installment loan for a car, and 6 months from now a lender may not know if you still have the ability to do so, so you score falls.

Even checking your score lowers your score.

ANON checking ANONs score DOES NOT lower your score. ANON allowing a lender to do a hard pull check does lower the score, but only a small amount 10-20 points and this is temporary about a month or two. Further, do several hard pulls at once, they don't each lower by 10 or 20 points. If you do the pulls close together (within a week or two) it will be only the temporary lowering for a month or two. From a lender's perspective if you're reaching out for new lines of credit, it means you're indicating you're about to take on more debt which could affect your ability to pay on further new debts.

Taking out loans lowers your score

Temporarily, yes, but over time this can grow your score if its in a different loan type or length.

Paying back loans lowers your score

Yes and no, circumstances depending. If you pay back that one loan type lets say a car loan, and you have have no other installment loans, then you will have no more recent history of paying on any installment loans. However, if you have a mortgage which is another type of installment loan, you'll take no hit for paying back the car loan as you will continue to have a recent payment history of paying on installment loans. You could take a hit because a nearly paid off loan looks good for the "Amounts owed" component of the score, but you could use a trick like getting a credit card of the same credit line (and not charge anything on it) to avoid that if you really need to.

Not taking out loans lowers your score

Not quite true. Having no recent payment history means a lower score, but it you already have some type of loan or credit you pay on every month, not taking out more loans will not hurt your score.

One final thought I really really want to dispel: YOUR FICO SCORE IS NOT INCREASED BY PAYING INTEREST ON CREDIT CARD DEBT!

Try everything you can to avoid carrying credit card debt into next month. Interest rates are crazy high and it does nothing to help you. If you put a purchase on a credit card, make sure to pay the full statement balance every month. If you do this, you'll pay zero interest on any credit card purchases.