Common Myths on Building Credit

October 21st, 2017 | Author:

If you are just starting out on your own, you may have a hard time getting credit cards or loans because of a lack of credit history. You must build credit to get access to the best credit cards and loans, but you can mess things up if you don’t know how to do it correctly. Here are some common myths people have on building credit.

Myth 1 – You must use your credit card all of the time to build credit.

It’s common for people to think they must be using their credit card to build credit. However, this information can work to your disadvantage if you do it the wrong way. Using your card and not paying down the balance can actually hurt your credit. Credit reporting agencies look at how much credit you use to partially determine your score.

If you carry a high balance, you may end up with a lower score even if you make the minimum monthly payments on time. It’s better to only use your credit card occasionally just to keep it active. Pay off the balance to get the most benefit.

Myth 2 – Maxing out the card is okay as long as you pay it off.

A maxed-out card can do major damage to your credit score even if you pay it off quickly. It depends on when you pay off your balance. If it is after the monthly cycle ends, it will show up as maxed out for that month on your credit score. It will cause your score to drop because of how much credit you used.

You should know when your cycle ends and make sure the payment is credited to your account before that date. You want to show a zero balance on your credit report to get the best credit score.

Myth 3 – You need debt for a good credit score.

Showing you know how to use credit and stay out of debt is much better for your score than having debt. As long as you have an active credit card, it can be paid off and still improve your credit.

Newest Answers

Get a Better Credit Score in 2017

January 22nd, 2018 | Author:

[I]f you have a goal to improve your credit score for the new year, you need to set up steps to help you achieve this goal. For many, they read all kinds of information about how to get a good credit score, and it can be overwhelming. Sometimes, it can sound so easy but not […]

Continue Reading »

Why You Need to Check All Three Credit Reports

January 19th, 2018 | Author:

[T]here are three major credit reporting agencies: Experian, Equifax and TransUnion. All of them provide a credit report which lists your personal information and credit accounts. You can get one report for free each year or purchase extra reports through the agency sites. Many people just get one credit report, but you really should get […]

Continue Reading »

What is the Right Amount for a Credit Limit?

January 18th, 2018 | Author:

[A]s you get credit cards, you will notice they give you a credit limit. This is the maximum amount you can spend on the card without paying some of it off first. Credit card companies often increase your credit limit as you prove responsible handling the amount you have. You may wonder if more credit […]

Continue Reading »

Buying a Car with Bad Credit

January 12th, 2018 | Author:

[I]f you have bad credit, it can be difficult to qualify for a car loan. However, it’s not impossible. Before you go out and apply for money to purchase a vehicle, there are some things you should know. Check Your Credit Before you fill out any applications for car loans, you need to take a […]

Continue Reading »

What Does No Credit Mean?

January 10th, 2018 | Author:

[M]any people hear that they have bad credit, which means they haven’t always been responsible with their credit accounts. However, it is another situation entirely when a person is told they have no credit. You may wonder how that’s possible and what it really means for your future. No Credit Doesn’t Mean Never Any Credit […]

Continue Reading »

What You Need to Know about TransUnion

January 8th, 2018 | Author:

[T]ransUnion is one of the three credit bureaus which stores information about consumers and their credit history. It provides this information to creditors and to consumers. TransUnion was founded in 1968, and it now has more than 200 offices through the US and the world. How TransUnion is Different TransUnion is similar to the other […]

Continue Reading »

What You Should Know about Equifax

January 5th, 2018 | Author:

[E]quifax is one of the three major credit reporting agencies which provides information used on your credit report. It has a credit score which will impact your ability to get approved for new credit. All of these agencies aren’t the same, so here is some information you should know about Equifax. Equifax is headquartered out […]

Continue Reading »