There is no doubt that a good credit score is a good thing to have. Having a good credit score has many benefits. A good score gives you lower interest rates, will better your chance at approval, give you more negotiating power, and help you get approved for bigger limits, just to name a few. Credit is definitely important in our financial lives, but it’s also the most misunderstood. As you went on through life you have probably gathered some sort of understanding in regards to what improves your score and what hurts your score. But chances are you are believing something to be true, but were actually told a myth.
Top 10 Credit Card Myths Busted
1. Checking your credit score hurts your credit
Checking your credit score has no affect on your credit score. It is actually recommended to be mindful about your score and check it regularly. Your credit score is one of the ways you can catch someone fraudulently using your credit cards. Although excessively applying for credit cards will hurt your credit score.
2. Closing accounts will raise your credit score
Closing an account actually hurts your score. Credit reports grade you on your available credit and how much of it you are using. Therefore closing an account would count against you.
3. Paying off debts instantly restores your credit
Your credit report is a history, not an instant snapshot of your credit. Paying off debts will improve your credit, but does not erase the fact that you owed a large balance. Your score will rise as you develop a history of being close to debt-free.
4. All you need to do to maintain a good credit score is pay your cards in full and on-time
This is great unless you are charging amounts that are close to your credit limit. Even if you are paying off your balance each month, you score is calculated based on how much of your limit you are using.
5. “No limit” credit cards have no spending limit for purchases
All cards have limits based on your credit history and financial circumstances.
6. An ID is required when you pay with a credit card
Merchant’s agreements with major credit card companies specifically forbid them from requiring ID. Your signature is supposed to be enough.
7. Your new credit card account won’t show up on your report until you activate it
Your new account will show up as active on your credit reports shortly after the card is approved.
8. My credit card company won’t change my rate unless I mess up
Any rate is subject to change with 15 days notice. New regulation prevents rate increases on existing balances, unless you miss payments.
9. Debit cards have better fraud protection than credit cards
Credit cards provide more fraud protection, but they are almost as likely to incur fraudulent charges.
10. You need to carry a balance to have good credit
Your statement balance is the only thing reported, so carrying a balance won’t improve your credit.
Having a credit history is indeed important to have. So many of life’s major decisions, such as financing a vehicle or even applying for a mortgage, rely on your credit history. If you have no history or have very little credit history, it makes it extremely difficult to apply and get approved for any lines of credit or loans.
My fiance had a hard time establishing a credit history. His parents don’t believe in credit cards and never taught him the benefits of having a good credit score. He didn’t understand the importance of credit history until he needed to finance a vehicle. He applied for many credit cards and was declined due to limited or no credit history. That was before we realized you can establish credit history other ways other than credit cards. There are actually 7 ways to build credit without credit cards. Check out this post.
Latest posts by Kristy (see all)
- How to Master the Art of Napping - December 15, 2017
- 21 Tips to Help You Fall Asleep and Get Better Sleep - December 8, 2017
- 12 Best Cable Alternatives: Save Money and Enjoy Your Favorite Shows - November 24, 2017