10 Common Credit Myths

  • Clearing Up Credit

    Credit card holders are all too aware of the effects of a recession on their personal finances, but in order to pull ourselves out of an economic rut, we’ll have to dispel some common credit card myths. Photo Credit: Andres Rueda
    Myth #1: We’re getting better about debt.
  • Myth #1: We’re getting better about debt.

    Consumers could actually end up with more debt this year than in 2009, according to a credit card debt study by CardHub.com. While debt was lower in the first quarter of this year, much of the decrease can be attributed to tax refunds and annual bonuses being used to pay off debt as well as bad debt being written off. This occurs during the first quarter of every year, according to CardHub. This year, however, the predictable first-quarter decrease in debt was smaller than last year’s decrease, CardHub’s research found. Photo Credit: alancleaver_2000
    Myth #2: Checking my credit score will lower my credit score.
  • Myth #2: Checking my credit score will lower my credit score.

    Simply checking your credit score is considered a “soft pull,” and it doesn’t lower your score, says Ken Lin, CEO of online credit information provider Credit Karma. Only hard inquiries that are made by lenders will impact your credit, Lin says. Photo Credit: TheTruthAbout...
    Myth #3: Carrying a balance is good.
  • Myth #3: Carrying a balance is good.

    It’s a common misconception that carrying a balance on a credit card is a good thing because it helps you build your balance faster, especially when you’re first establishing credit. But that’s simply not true, says John Ulzheimer, a consumer credit expert at Credit.com. Actually using your credit cards is good for your credit score, but carrying a balance just means you’ll have to pay interest on your balance. Photo Credit: xJasonRodgersx
    Myth #4: You shouldn’t use credit at all.
  • Myth #4: You shouldn’t use credit at all.

    Many cardholders think that their credit score won’t change if they don’t use credit at all. But not using credit at all could lower your score, says Lin of Credit Karma. Your credit score is a reflection of how responsibly you use credit. But you’ll actually have to use it to show that you can pay it off in a responsible way. Photo Credit: mangpages
    Myth #5: Young people are more likely to have debt.
  • Myth #5: Young people are more likely to have debt.

    It may seem like teenagers and young adults have a lot of trouble stifling their credit card-using shopaholic urges, but people aged 55 and older are actually the most likely to have credit card debt, according to a recent survey from Harris Interactive and Lending Club. The survey found that 73% of those 55 and older reported having credit card debt and just 60% percent of people 18-34 said they have credit card debt. Photo Credit: See-ming Lee
    Myth #6: The higher your income the better your score.
  • Myth #6: The higher your income the better your score.

    A six- or even seven-figure salary or a getting a large inheritance doesn’t affect your credit score at all. Your responsible use of credit and timely payments, not your ability to pay, are what matter here, Lin notes. All you really have to do is use your credit and pay your balance in full each month. Photo Credit: aresauburn
    Myth #7: Marriage means sharing a credit score.
  • Myth #7: Marriage means sharing a credit score.

    Even in marriage, each member of a couple keeps their own credit score. Unfortunately, if you have a joint credit card account and one spouse uses it irresponsibly, failure to pay that credit card bill on time could affect both of your scores and show up on both of your reports, Lin says. Photo Credit: freeztar
    Myth #8: Authorized users and credit scores.
  • Myth #8: Authorized users and credit scores.

    Contrary to what some cardholders believe, being signed up as an “authorized user” of someone else’s card doesn’t have any impact on your credit score at all, Lin says. But you’re the authorized user, so any of your spending missteps could be bad for the accountholder’s credit score. Photo Credit: gingerpig2000
    Myth #9: Closing accounts increases your credit score.
  • Myth #9: Closing accounts increases your credit score.

    Among credit card holders, 18% believe that closing credit card accounts will improve their credit score and 27% say it won’t affect their score at all, according to a survey from Harris Interactive and Lending Club. This simply isn’t true, credit experts say. The amount of credit you have compared with the amount of credit you’re using plays a large part in determining your score. To put it simply, it’s best to have more credit available than what you’re actually using. Photo Credit: The Consumerist
    Myth #10: Highest interest rate balances paid first.
  • Myth #10: Highest interest rate balances paid first.

    According to the new federal credit card rules, “If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate.” But that’s only the case if you pay more than your minimum required payment, not exactly your minimum payment. Photo Credit: masochismtango
    Store Credit Cards
  • Store Credit Cards

    Discounts you get from using store credit cards may not be saving you as much money as you think. To find out more, read MainStreet's story, Store Credit Cards: A Rip Off? Photo Credit: stevendepolo
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