Credit Card Myths

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Credit cards are a great tool to help you establish financial responsibility and build your credit. But if you aren’t careful with how you use your cards, you could end up damaging your credit score and hurting your chances at getting approved for a loan in the future. Here are some common credit myths debunked so you can use your cards wisely:

Checking Your Credit Report Will Lower Your Credit Score

Checking your report won’t lower your score. In fact, it can actually help you. Reviewing your credit report is one of the best ways to protect your credit and your identity. Your credit report shows all of the financial accounts that are open in your name, and can indicate if you’ve been exposed to identity theft. If you notice any errors on your report, you can contact the credit bureaus to have them corrected or removed. You are entitled to one free credit report every year from Annual Credit Report. Checking your credit report allows you to stay on top of your credit history, so you won’t be surprised the next time you apply for new credit.

Credit Cards Lead to Debt

If you max out your credit cards and have no repayment plan in place, you can end up owing way more money than you’ll be able to easily repay. However, responsible use of your credit cards can help you build credit. If you are faced with a large unforeseen expense, such as an expensive repair, paying for it with a credit card can help you out of a tricky situation in the moment. As long as you make regular on-time payments to pay off your balance, your credit score won’t take a major blow. Making your payments on time will help you establish your credit history as a responsible credit user. This will work in your favor when the time comes to finance a home or a car.

Late Payments Don’t Hurt Your Credit

Any time you borrow money, either through a credit card or another type of loan, your repayment history is reported to the credit bureaus. Late or missed payments will show on your credit report, and will lower your credit score. Making regular on-time payments is the best way to raise your credit score.

Carrying a Balance Helps Your Credit

Regular use of your credit card will help improve your score, but that doesn’t mean you have to carry a balance. The higher your credit card balance, the more you will have to pay in interest, so it’s best to either pay your balance in full each month, or at least keep it as low as you can. Making your payments on time each month is what helps your score most, whether you make the minimum payment or pay the balance off in full.

Don’t Have More than One Card

Having multiple credit cards won’t hurt your credit score, as long as you don’t open too many new credit accounts in a short time frame, and you maintain responsible use of your accounts. Having more than one credit card may even help improve your credit utilization ratio, or the amount of credit you are using compared to how much credit is available to you.

Close Old Accounts Before Opening a New One

Since having multiple cards doesn’t hurt your credit score, there’s no need to close an existing account before you open a new one. Closing your oldest credit accounts could actually damage your credit. An older account will show your payment history, and a long history of on-time payments is the best way to represent your responsibility as a borrower. This makes credit lenders more likely to work with you, so only close your oldest account if you no longer need it.

You Can’t Change Your Interest Rate

The interest rate you receive on your credit card is based on a number of variables, including the current rates, your credit score, and your credit history. If your credit has improved since you originally applied for the account, you may be eligible for a lower rate. It doesn’t hurt to determine if you qualify for a rate reduction.

Higher Credit Limits Hurt Your Score

If you’re likely to charge more to your credit card than you can afford to repay, a credit limit increase might not be the best option for you. However, a higher credit limit could improve your credit utilization, which directly impacts your credit score.

Prepaid Cards Help Credit

Prepaid credit cards can be convenient to use, but have no influence on your credit score. A prepaid debit card is most similar to using cash, just in card form. It’s not linked to your account, or any line of credit, so it can’t help you with boosting your credit. It can only access the funds that are already loaded onto it. Are you ready to apply for a credit card, or transfer your balances from another card? A Robins Financial Credit Union Visa® Platinum Rewards Credit Card is one of the best credit cards you can carry. We’ve partnered with Visa® to offer you premium purchasing power for everyday needs, shopping, travel, and more. You can enjoy a low variable rate, and we offer many convenient payment options to make your life even easier! Enjoy top-of-the-line security, and earn points on your purchases through the Scorecard® Rewards Program. View rate information and our credit card agreement online now. Apply online, stop by one of our branches, or give us a call to find out more.

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