December 26, 2022
Three myths about credit cards
Your credit score plays a vital role in your financial life. The higher your credit score, the better you will do when it comes to obtaining a loan.
And yet, many Americans make the same common mistakes with credit, putting their financial future at risk. Credit cards are one of the best tools when it comes to building credit, but you must take care of the way you use it.
Here are some of the most common myths about credit cards and credit scores:
Myth One: You can't get a credit card with a low score.
According to a Capital One report, almost 70% of Americans believe that having a credit score that is too low will prevent them from qualifying for any type of credit card, which is not true.
Choosing the right type of card can make all the difference, for example, getting a secured credit card or “using a parent's card as an authorized user” are good options to start with.
Some secured cards require a cash deposit that later serves as a line of credit, which can be a good option for those without a payment history. Otherwise, consider a card that requires a cosigner. In that case, your parent or co-signer is responsible if the account is not current.
Myth Two: Paying utility bills can improve your score
Most utility companies do not report payment histories to credit bureaus.
If you're trying to boost your credit score, paying those bills on time only counts if you've signed up for a program like Experian Boost, which will factor in on-time utility, phone, and cable payments into your credit score. credit history.
Myth Three: Carrying a Balance Helps Your Score
Another common credit card misconception is that carrying a balance every month will improve your credit score.
It is the most expensive mistake. In fact, any amount of debt costs you in interest charges. Normally, these are calculated based on the average daily balance.
If you don't pay in full, make sure you pay at least the minimum. Paying less than the minimum is the same as paying nothing.
Credit card interest rates are now above 19% on average - an all-time high - after rising at the steepest annual pace in history, in step with the Federal Reserve's rate hikes to combat the inflation.
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