Myths that damage real scores
Short answer
Four beliefs do most of the damage: that checking your own score lowers it (it does not β that is a soft inquiry), that closing old cards helps (it usually hurts credit age and utilisation), that no credit history is safe (lenders read it as unknown, not safe), and that 'Settled' is the same as 'Closed' β it is not, and it marks your report for years.
These four beliefs are common, sincere, and expensive.
Myth 1: "Checking my score lowers it"
False. Checking your own report is a soft inquiry β invisible to lenders, no effect on your score, however often you do it.
Only a hard inquiry counts, and that happens when a lender pulls your report because you applied for credit. The difference is set out in hard vs soft inquiry.
This myth is expensive in an indirect way: people avoid looking, so they never spot the errors β a closed loan still showing open, someone else's account attached to their PAN β that are quietly dragging the number down.
Myth 2: "Closing old cards helps"
Usually backwards. Closing a card does two unhelpful things at once:
- It removes that card's limit from your total, which raises your credit utilisation on everything else.
- If it was your oldest account, it shortens your credit age.
There is one honest exception: if a card charges a fee you cannot justify, or if holding it genuinely tempts you into debt, close it. A slightly lower score is a fair price for financial peace.
Myth 3: "No credit = good credit"
No. A blank file is not a clean one. Lenders cannot judge what they cannot see, so many decline rather than guess.
The fix is not to borrow recklessly. It is to build a small, boring history: an FD-backed secured card, an add-on card on a family member's account, or a small consumer-durable EMI paid perfectly. That is the next lesson.
Myth 4: "Settled and Closed are the same"
Dangerous. They look similar on a statement and are worlds apart on a report.
| Status | What it means | How lenders read it |
|---|---|---|
| Closed | Repaid in full, account shut | Neutral to positive |
| Settled | Lender accepted less than owed | Negative, for years |
| Written-off | Lender gave up on recovery | Seriously negative |
If a settlement has already happened, it is not permanent β such markers age out over time, and every clean month after it counts. See settled vs closed for what to do next.
A fifth one, quietly common
"More cards always means a lower score." Mostly false. Several cards managed well can help, because your total limit rises and utilisation falls. What hurts is applying for many cards in a short burst β that is the inquiry factor, not the card count.
All figures on this page are indicative and dated. Rates and fees differ by bank and change over time. Always verify with your bank's official schedule of charges.
Frequently asked questions
Does closing a credit card improve my credit score?
Usually not. Closing a card removes its limit from your utilisation calculation, which pushes the ratio up, and closing your oldest card shortens your average credit age. If the card is free to hold, keeping it open and lightly used is generally the better move.
What is the difference between 'Settled' and 'Closed' on a credit report?
'Closed' means the account was repaid as agreed and shut. 'Settled' means the lender accepted less than the full amount owed, and it stays on your report as a negative marker for years. Always aim to be reported as Closed, even if it takes longer.
Sources
The regulation and official pages this page is checked against. If one of them disagrees with us, it wins.
- FAQs β Understand Your Credit Score and Report β TransUnion CIBIL
- What is a CIBIL Score β TransUnion CIBIL
- Free Annual Credit Report to Individuals β Reserve Bank of India
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