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According to Dave Ramsey, “Responsible use of a credit card does not exist.” What? That is one of the most ridiculous statements I’ve ever read. Yes, many people are irresponsible when it comes to credit cards, but if you frequent this blog, Flyertalk, or any other points and miles blog chances are, you’re a responsible credit card owner (If you aren’t, this game is not for you). I can’t stand when people, especially “experts”, make statements like this that are completely false. So, this post is a compilation of the top 7 credit card myths.
Myth 1: Signing-up for a credit card(s) hurts your credit score
This is probably the most common myth I’ve heard, so it’s time to debunk it. Signing up for a credit card, or multiple credit cards, will lower your score by 3-10 points, however, those points will bounce back within three months. If you’re a responsible credit card owner, it’s likely your score will increase by signing up for multiple credit cards.
Myth 2: Checking your credit hurts your score
Nope. You can check your score all you want, often times for free and it won’t affect your score at all. In fact, I highly suggest you check your score as often as possible (once a week with Credit Karma, once a month with Discover, Capital One, Credit.com, and Credit Sesame, once every six months with Quizzle).
Myth 3: Having a lower credit limit helps your score
I’ve heard people ask the credit card companies to lower their credit limits in hopes of improving their score. In reality, though, that is the exact opposite of what you should do. Having a higher limit is much better, since it lowers your credit utilization. Credit utilization is about 30% of your credit score, so it’s extremely important! As a side note, you do not want your credit utilization to be 0%. 1%-5% is great for your score!
Myth 4: You should close credit cards you aren’t using
Absolutely not! There are some rare instances where you should, but the general rule of thumb is to never close your cards. Keeping credit cards open will help your utilization and increase the average length of your accounts. Both of those things help your score tremendously.
Myth 5: Not signing up for credit cards helps your score
If you don’t sign-up for credit cards, it won’t help your score. By signing up for more cards, your utilization increases, your types of accounts increases, and your score increases over time. If you don’t have credit cards, your score will not benefit from them at all.
Myth 6: Paying the minimum balance due is enough
You should never pay interest on a credit card. The interest rates are outrageous and the rewards you earn with a card will be completely outweighed when you pay interest. You should pay the balance in full every month.
Myth 7: All credit scores are the same
That would be very nice if it was true. There are three different credit reporting agencies and every score is different. Take Credit Karma and Quizzle, for example, both report from different banks, meaning your scores will be different. On the other hand, FAKO scores like Credit.com and Credit Sesame, both report your Experian score, yet the scores are different because their estimated.