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Just in case you like to speed read articles, I’ll cut to the chase and tell you that race and gender DO NOT impact your credit score.

Many consumers believe a host of myths and misconceptions about their credit scores. Some of the biggest fallacies surrounding this topic involve race, income and other factors that do not impact your credit rating at all. Here are some other common myths.

Fact Vs. Fiction About Credit Scores

FICTION: If I check my credit report often, all those “inquiries” will lower my credit score.

FACT: Your personal inquiries are called “soft” inquiries and do not impact your credit score at all. You can check your credit as much as you’d like with no negative impact, as long as you do it through a credit bureau or a company authorized to issue credit reports, such as Fair Isaac, creator of the FICO score.

EXPLANATION: Even though you may see all kinds of inquiries in your credit file, many of them have no bearing on your FICO score. For instance, your FICO score doesn’t count your own inquiries, as well as those from existing creditors who are reviewing your account, or lenders trying to offer you “pre-approved” credit.

FICTION: I pay cash for everything and don’t buy on credit or use credit cards, so my credit score should be excellent.

FACT: Having no credit history or never using credit can have a negative impact on your credit score.

EXPLANATION: It helps your FICO score to have some history of paying credit obligations on time. FICO reports that people with no credit cards tend to be higher risk than those who have credit cards, use them periodically, and manage their debt responsibly.

FICTION: I’m going to close out my old accounts since I’m not using them any more, and that will improve my credit score.

FACT: Depending on your overall credit profile, you can actually hurt your credit score by closing older, more “seasoned” accounts.

EXPLANATION: Generally speaking, it works in your favor to have older accounts in your credit file because it shows that you have a longer credit history.

FICTION: The most important factor in my credit score is whether or not I am “maxed out” on my credit cards.

FACT: The single biggest determinant of your credit score is how well you’ve paid your bills on time in the past.

EXPLANATION: Your FICO score takes into account whether or not you’ve had late or missed payments, how far past due your bills were, how long ago the late pays occurred, as well as whether you have any collection items or public records, such as a repossession, foreclosure or judgment against you.

FICTION: My age, race, gender, marital status, income or where I live can impact my credit score.

FACT: None of those factors are taken into consideration at all when your FICO credit score is determined.

EXPLANATION: Under U.S. law, it is illegal to for credit scoring to take into account race, age, color, nationality, religion, sex and marital status.

Your credit is of such critical importance that you can’t afford to operate on the basis of false information. So be sure to separate fact from fiction.

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Here’s a tale about two 40-year old guys who are best friends. We’ll call them Bill and Skip. From the time they were teenagers both Bill and Skip dreamed of becoming successful corporate sales executives and enjoying the finer things in life—you know, nice house, sporty cars, designer suits, the whole works. Bill and Skip attended the same college, and both graduated with business degrees and a 3.5 grade-point average. They married around the same time, and each now has two kids of the same ages, 7 and 5. Since Bill and Skip are sports buffs, neither one smokes; in fact, the two of them are in great shape because they work out together every weekend at the local gym. Although Bill and Skip both work for the same Fortune 500 company, that’s where the similarities end.

You see, Bill always pays his bills on time. He’s made it a point in his life to handle his financial affairs responsibly. So he keeps his debts at manageable levels, always keeps up with his obligations, and safeguards his credit in every way he can. In fact, he makes payments on his $400,000 mortgage ten days ahead of the due date. Skip, on the other hand, plays fast and loose with his finances. He skips Visa payments every now and then, sometimes just because he’s too busy to get stamps from the post office. Because he’s on the road so much, Skip often forgets to mail his cell-phone payment when it’s due. “What’s the big deal if I pay it a couple days late?” Skip thinks. “They’re still going to get their money.” In addition, Skip has missed making his mortgage payment on time twice in the last year, once when he was on vacation and another time when he was traveling for a business conference. The same thing happened with his car payment for the Lexus he drives. Unfortunately, Skip didn’t have automatic payments set up online to make those payments in his absence. “I can’t be bothered with that. Those things are too complicated, and besides I’m too busy,” he said when his wife suggested putting their bills on automatic payment plans to avoid those constant late fees. Skip’s wife was tired of arguing with him about their money problems, so she just let it go. But when it came time for Bill and Skip to get loans and insurance, the wayward Skip was shocked at how much he had to pay. When the two friends compared notes, here’s what they found:

• Mortgages—Although Bill and Skip both took out 30-year, fixed-rate mortgages for $400,000, Bill’s monthly payment is $2,300 a month while Skip’s is $2,800. Compared to Skip’s, Bill’s mortgage payments are $6,000 less per year, saving Bill $180,000 over the life of his loan.
• Auto Loans—Both made equal down payments to finance their late-model Lexus automobiles, but Bill’s payment is $400 a month while Skip pays $550. By the time the cars are paid off in five years, Bill will have doled out $9,000 less than Skip. And since the average American family buys seven new cars in a lifetime, that $9,000 gets multiplied seven-fold for a total lifetime savings of $63,000.
• Credit Cards—Bill and Skip are carrying $3,000 balances on their Visa credit cards. However, since Bill has perfect credit, his interest rate is just 8.9%; Skip’s is at the default rate of 28.99%. So Bill pays around $27 in monthly interest while Skip is hit with charges of $87 each month. In five years’ time Bill saves $3,600 in interest costs. At this rate, over the next 30 years, Bill will pay $108,000 less in finance charges.
• Life Insurance—Both men bought $500,000 whole-life insurance policies. Bill’s costs him $320 a month or $3,840 yearly; Skip’s costs $410 a month or $4,920 annually. Over the course of 40 years, Bill will save $43,200 by paying $153,600 for insurance compared to $196,800 spent by Skip.
• Auto Insurance—Though both own cars of an identical year, make, and model, Bill’s insurance costs $1,800 a year while Skip’s runs $2,340. Bill’s five-year savings on auto insurance is $2,700 ($9,000 paid by Bill versus $11,700 paid by Skip). Over 35 years Bill’s savings add up to $18,900.

A Promotion Won and Then Lost

All told, Bill saves at least $413,000 because of his lifetime of perfect credit. That’s nearly a half million dollars that Bill keeps in his bank account, simply for paying his bills on time and managing his credit wisely. But the financial benefits don’t end there.

Bill and Skip are also up for promotion to Senior Vice President of Sales. Even though they’re competing for the same position, they’re still buddies. Bill tossed his hat into the ring for promotion not knowing that Skip was going to go for it. When Bill found out that Skip was interested in the job, Bill thought about withdrawing his name. “The truth of the matter is that you are the better salesman,” Bill told Skip, adding that “Everyone knows you’re a shoe-in for the promotion because of your outstanding sales record. You deserve a promotion.” As it turns out, the boss saw it that way too. After interviewing four candidates for the job, the boss picked Skip. But because the job paid $100,000 annually, the human resources department performed its customary background check, running Skip’s credit report in the process. Within 24 hours Skip’s promotion had been rescinded. The high-paying job ultimately went to Bill, who received a $25,000 raise. Neither guy thought it was fair, but as Skip’s boss said upon withdrawing the promotion, “Hey, it’s nothing personal. It’s just business.”

Apparently the company figured that bad credit meant that Skip wouldn’t be as trustworthy and might be tempted to steal customer funds if his own money problems worsened. Skip went home seething mad. He consulted a lawyer to see whether his boss could legally offer him a job and then take it back because of Skip’s bad credit. The attorney advised Skip that unfortunately what the employer had done was perfectly legal. When Bill went home, he was ecstatic. He did the math and realized that over the next 25 years the extra $25,000 in salary meant he would generate $625,000 in additional income before retirement, not including any other raises. As you can see, paying his bills as agreed allowed Bill to save and earn a total of $1,038,100 more than poor Skip, who continued to skip payments and wound up constantly penalized for his lousy, bad credit.

Excerpted from Perfect Credit:  7 Steps to a Great Credit Rating

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If you’ve ever pulled your credit files from each of the three major credit bureaus and tried to compare them, you know that certain information in your credit records likely to be different. But did you also realize that the manner in which the credit bureaus present your credit data is also like to differ substantially?

Here are some highlights of the differences between each credit bureau’s reports – and how that information can help you to both better understand and improve your credit rating.

• Equifax Highlights

As of this writing, Equifax reports are the only ones that summarize “Open Accounts” and “Closed Accounts,” making it far easier to distinguish this information and choose which accounts you want to examine first. (With Experian and TransUnion, all accounts are grouped together and listed alphabetically).

Equifax files also often show an 81-month credit history for your credit accounts. In some cases, however, particularly for closed or paid accounts, you will see a statement saying: “No 81-Month Payment Data available for display.”

• Experian Highlights

Experian credit reports contain a unique feature that many users find extremely enlightening. For all of the accounts listed in your credit file, Experian shows you “Status Details” indicating when an account is scheduled to fall off your credit report. For example, since positive payment history remains on your credit report for 10 years, an auto loan that you paid off and closed in July 2008 will show the following Status Details: “This account is scheduled to continue on record until July 2018.” By contrast, let’s say you had an account go to collections and ultimate get written off by a creditor. For those of you who with these and other negative marks in your credit file, you won’t have to wonder how long a certain blemish will haunt you. That critical “Status Details” section of your Experian report will give you that precise information.

With Experian credit files, you will also see a monthly “Balance History” for any accounts that are still open, or for those closed accounts with an outstanding balance. The “Balance History” information in Experian credit reports currently dates back to November 2007. Also included in the “Balance History” section will be a statement indicating was your high credit/high balance was has been, over different time frames, since November 2007. If you have accounts opened after November 2007, the Balance History data will reflect whatever time period you opened the account. For instance, it could say: “Between September 2008 and January 2010 your credit limit/high balance was $5,000.”

• TransUnion Highlights

TransUnion has the most thorough employment data section in your personal summary. You can update or correct several fields, including: your current or previous employer’s name, the position you held and the date you were hired. Changing this information will not improve your credit score. However, if you ever seek a loan in the future, it will be helpful to have your information accurately reflected in your credit report to show a lender your hire date for a job, or the length of time you spent at a specific employer.

TransUnion reports list “Satisfactory” and “Unsatisfactory” accounts. They also include color-coded boxes (white, green, yellow, orange and red), with words or numbers inside of them, to indicate your payment history:

• A white box with an “X” indicates unknown information
• A green box with “OK” signals that your payment is current.
• A yellow box with “30” means you were 30 days late on a payment.
• An orange box with “60” means you were 60 days late.
• A red box with “90” means you were 90 days late.
• A red box with “120” means you were 120 days late.

Lastly, TransUnion also uses the notation “N/A” or “Not Applicable” to describe various accounts.

The Information Found In All Credit Reports

All credit reports – whether from Experian, Equifax or TransUnion – contain basic information that can be categorized into five primary sections:

• Personal Information

These personal facts about you include your full name, date of birth, address, place of employment, and a partial listing of your social security number.

• Summary of Accounts

Your account summary lists any information creditors have reported about your payment history on loans of all kinds, such as mortgages, credit cards, auto loans, and student loans.

• Public Records

Any public record on your credit file – such as a judgment, tax lien or bankruptcy – will seriously lower your FICO credit score. However, judgments or bankruptcies listed as “dismissed” will not impact your credit rating because they will be ignored by credit-scoring firms, as if they never happened.

• Inquiries

An inquiry in your credit file is a record of any application for credit that you made. For example, if you seek a mortgage or car loan, or even if you apply for a credit card or perhaps request an increase in your current credit card limit, any of these actions can result in an inquiry, also known as a “hard” pull of your credit file. (Pulling your own credit report is a “soft” pull and doesn’t impact your credit rating).

• Consumer Statements

Under the Fair Credit Reporting Act, you are allowed to add a 100-word “Consumer Statement” to any of your credit reports if you have disputed an item in your credit files, but the item was not removed because it was verified by a creditor.

Scrutinizing your credit reports puts you one step closer to achieving a great credit rating because you will undoubtedly become better educated about your credit just looking at the highlights of each credit file, and the way that similar information is presented differently in each credit report. You’ll only be able to spot these differences, though, by closely examining your credit reports generated by Equifax, Experian and TransUnion.

If you want the most up-to-date copies of your credit reports, you can get them at no charge from AnnualCreditReport.com. Knowing what’s in your credit files is great, but you should also know your credit scores. So if you haven’t obtained your credit score in a while, read this post on how to get your FICO credit score free too.

Like this article? Check out bestselling books from The Money Coach!

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FICTION: If I check my credit report often, all those “inquiries” will lower my credit score.

FACT: Your personal inquiries are called “soft” inquiries and do not impact your credit score at all. You can check your credit as much as you like with no negative impact, as long as you do it through a credit bureau or a company such as FICO^â authorized to issue credit reports.

EXPLANATION: Even though you may see all kinds of inquiries in your credit file, many have no bearing on your FICO^â score. For instance, your score does not count your own inquiries as well as those from existing creditors who are reviewing your account or lenders who are trying to offer you “pre-approved” credit.

FICTION: I pay cash for everything and don’t buy on credit or use credit cards, so my credit score should be excellent.

FACT: Having no credit history or never using credit can have a negative impact on your credit score.

EXPLANATION: It helps your FICO^â score to have some history of paying credit obligations on time. FICO^â reports that people with no credit cards tend to be higher-risk than those who have credit cards, use them periodically, and manage their debt responsibly.

FICTION: Closing my old accounts since I’m not using them any more will improve my credit score.

FACT: Depending on your overall credit profile, you can actually hurt your credit score by closing older accounts.

EXPLANATION: Generally speaking, it works in your favor to have older accounts in your credit file because it shows that you have a longer credit history.

FICTION: The most important factor in my credit score is whether or not I am “maxed out” on my credit cards.

FACT: The biggest determinant of your credit score is how well you’ve paid your bills on time in the past.

EXPLANATION: Your FICO^â score takes into account whether you’ve had late or missed payments, how far past due your bills were, how long ago the late payments occurred, and whether you have any collection items such as a repossession, foreclosure, or judgment against you.

FICTION: My age, race, gender, marital status, income, or place of residence can impact my credit score.

FACT: None of those factors are taken into consideration when your FICO^â credit score is determined.

EXPLANATION: Under U.S. law it is illegal to for credit-scoring to take into account race, age, nationality, religion, sex, or marital status.

Excerpted from Perfect Credit: 7 Steps to a Great Credit Rating

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