Five Credit Myths
Don’t Let These Credit Myths Damage Your Credit Score
Credit scores are a crucial part of a person’s financial picture. Creditors use credit scores to determine whether to issue someone credit. A person with good credit is more likely to receive credit. It is important to have a good credit score and there are many ways to maintain one. However, there are many credit myths as well.
- Some people think that using a debit card will help increase their credit. This is not true. A debit card draws its funds from the owner’s bank account. This is not the same as using credit because a person is using his or her own money. Therefore, it will not affect a person’s credit score.
- Some people think that going over a credit card’s spending limit will not affect their credit score. A key factor that helps calculate someone’s credit score is his or her credit utilization. This is how much credit a person uses compared to his or her credit limit. Higher credit utilization will result in a lower credit score. If a person goes over his or her credit limit, then his or her credit score will reflect that.
- Some people think that paying off that balances on their credit cards will help raise their credit score. Although it is a good idea to pay off one’s credit card balances. It will not greatly affect a person’s credit score. Again, a person’s credit utilization is what most affects his or her credit score.
- Many people believe that all credit cards affect their credit scores equally. Credit bureaus measure a credit card’s influence based on the issuer’s prestige. The more prestigious the credit card issuer, the more influence a credit card has on a person’s credit score.
- Some people think that paying off old debt will help raise their credit scores. Although this makes sense, it is not true. As a debt gets older, its effects on a person’s credit score will decrease. However, as soon as one pays off a debt, the credit bureaus will treat it as if it were a new debt, increasing its effects on credit.
If you have any questions about credit cards, or would like us to look into your particular credit situation, please do not hesitate to contact us.