Just When You Thought You Knew Everything There Was to Know.
Do you know how your credit cards work? Do you know the in’s and out’s of how using it or not using it for that matter can affect your credit score? If your answer is, “yes”, then stop reading now! We’ll probably bore you with a bunch of information that you already know. However, if you’re not sure, you may be surprised by all of the things you probably don’t know about your credit card. And if that’s the case, by all means, please keep reading!
Myth #1: Not Using Your Credit Card is a Good Thing.
This is a common misconception that we run into with our clients and it simply isn’t the case. Certainly, not using your credit card is better than maxing out your credit card, however, the point of a credit card is to create an account and a history of how you are able to borrow and repay credit. If you aren’t using your credit card at all, then your score is probably suffering from under utilization. In fact, some companies will cancel your account if there is no activity within 90 days, which also hurts your score. The point is to know “how” to use your credit card.
Myth #2: Not Having Credit Cards is the Way to Financial Success.
If you make a great deal of money, make all of your purchases with cash and never intend on ever needing credit or a loan for anything ever in your entire life; then you don’t need credit cards. You’re good to go! However, we rarely run into these types of people and the truth is, unless that is you described above, you most certainly need credit cards. Credit cards and how they are managed make up a great deal of your overall credit score, so if you don’t have credit cards, you’re immediately forfeiting a lot of easy points and in some cases, taking the risk of not having a score at all.
Myth #3: Having More Credit Cards Will Increase Your Score.
There is a rhyme and reason to the amount of revolving credit accounts that you should have. Having more credit cards will not necessarily give you a higher score, in fact, depending on how many you have, it could hurt your score. Revolving credit requires that the user is able to manage it properly. Everyone manages their finances different, which means that understanding how revolving credit affects your score is critical to having the optimal amount of accounts.
Myth #4: If You Have Too Many Accounts, Start Closin’ Those Puppies!
Closing revolving lines of credit can be one of the single most detrimental things one can do to their credit file. In some instances, you may have to close accounts, however, there is most certainly a protocol to follow. If you find yourself in a situation where you are thinking about closing your credit cards or revolving accounts, be sure to contact a Tru Path Specialist before doing so. Closing a credit card account before understanding the consequences of that action is like stubbing your toe, really hard!! You’d give anything for an “undo” button.
Myth #5: My Credit Score is Perfect! I Pay Off My Credit Card Balances Every Month!
While this logically makes a lot of sense, it simply isn’t the case. While it doesn’t necessarily hurt your credit, you might not be optimizing your credit score to its greatest potential. When you receive an action plan from Tru Path Credit, you will receive an optimal range of what your spending should be in relation to your credit limit in order to get the maximum amount of points that you can. Understanding how to manage your credit limit is a requirement if you’re looking to ever break into the 800 range.
Myth #6 Married Couples Should Add Each Other as Authorized Users.
While there are circumstances when this can help, there are several factors to consider before getting added as an authorized user to someone else’s credit card. Many people, specifically married couples, choose to do this without understanding what can happen if either of you have less than perfect credit already. This is another situation when you would want to consult a Tru Path Credit specialist before pulling the tigger. The affects are costly if you don’t understand how it works.
Just when you thought you knew how credit cards worked, we turn your world upside down! We understand how frustrating this whole process can be and that understanding it really does require a thorough education. While some of these myths logically make sense, along with many others, once you learn the reasoning behind why they report differently, you’ll most likely see your scores start to increase. Whether you have bad credit or good credit, there is more than likely room for improvement, which could save you hundreds, if not thousands of dollars in interest that you’re paying each year. Optimize your credit and improve your financial situation with TruPath Credit today!