5 Credit Card Myths That Are Hurting Your Credit Score

When it comes to boosting your credit score, there are a lot of myths floating around. It’s important to be skeptical and proceed with caution because your financial health is at stake.

If you are influenced by the wrong myths about credit cards, you can actually suffer from poorer credit, because you might be avoiding things that could help your score improve. Consider the following 5 myths that might be hurting your score:

Myth: Negative items are removed when you pay off the debt.

It’s good to get overdue credit card debts back on track, however, the late payments and the negative credit aren’t necessarily removed just because you repaid the account.

Slow pays on a credit card account negatively impact your credit, and the best way to offset that is to re-establish positive credit with the account. Your credit score gives you points for the positive activity and takes points away for the negatives – therefore, it’s very important to re-establish positive credit on the account to offset the negatives.

Myth: It’s best to pay off your balance completely as fast as you can.

It’s not true that you need to keep your credit card balances at $0 to get a good credit score. FICO® has reported that the people with the best credit scores typically do have multiple credit cards with balances, but they keep the balance owed low.

That’s not to say that one must carry a balance to build a good credit score; paying off your balances in full and not incurring finance charges, is the best way to save money and generate a great score.

Myth: You should avoid using credit cards at all to have the best score.

As we said above, you must use credit to generate a good score. It’s possible to achieve this without credit cards, but they are the most convenient way to prove you are a good credit risk; you can use them almost everywhere and easily make payments. If you avoid credit cards altogether, your credit report will be made up of fewer factors, reducing your “credit mix” and lowering your score.

A better strategy is to use credit cards periodically, while avoiding high balances or incurring expensive finance charges, and make your payments on time every month. Regular use will show that you’re good at using credit responsibly. That, and paying off the resulting debt quickly, will boost your score.

Myth: Debit is safer than credit at the checkout register.

If you use debit transactions at the register, your credit score won’t benefit from the activity. Using credit correctly will lead to positive credit reporting activity that will boost your score.

Because there is a myth that debit is safer than credit, many people pass up this opportunity to get some positive credit activity.

It may have been true in the past that debit cards were more secure than credit at the point of sale. But today, with chip-and-PIN technology, credit cards are just as secure to use, and that kind of security should be less of a concern when choosing debit or credit.

Myth: A low credit score means you can’t get credit at all.

If you’re stuck with a low credit score and you think that is blocking you from any access to credit, you should consider obtaining a secured credit card from your local bank or credit union, there you may find a card that you qualify for regardless of your credit history.

This type of credit card is “secured” by the amount you have deposited into an account against which the card draws funds; this is usually your credit limit as well. Make sure that the secured card reports to the credit bureaus, so you can be certain that you are building a credit history as you use the card and make payments. After about a year of using the secured card, your initial deposit is returned to you, and you should be able to “graduate” to an “unsecured” card.

Credit cards can be an important tool to help people build better credit scores, but they can be dangerous. Use them carefully and you’ll see improvements to your credit rating while benefitting from the security and other perks credit cards offer. But if you’ve gotten in too deep with credit card use, we’re here to help. Call today or get started online with a priority financial coaching session.

Manage your personal finances and improve your credit with our tailored, one-on-one Credit Coaching.Manage your personal finances and improve your credit with our tailored, one-on-one Credit Coaching.
Melinda Opperman

About The Author

Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovate ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over 19 years experience in the industry.