Credit Card Myths

young woman sitting outside holding credit card and smartphone, credit card, digital banking, checking credit score

Credit cards are a great tool to help you establish financial responsibility and build your credit. But if you don’t use your cards wisely, you could end up damaging your credit. Unfortunately, there is a lot of misinformation out there when it comes to credit cards and how you should use them. Here are some common myths about credit cards cleared up so you can ensure you’re using your cards responsibly:

Checking Your Credit Report Will Lower Your Credit Score

Checking your credit report will actually help you and is one of the best ways to protect your credit and identity. Your credit report displays all the accounts open in your name, so if you see any unknown accounts on your report, that could be an indicator that your identity has been stolen. If you notice unknown accounts or any other errors on your report, contact the credit bureaus to have them removed. Removing fraudulent accounts from your report can greatly improve your credit standing. You are entitled to one free credit report every year from Annual Credit Report.

Carrying a Balance Helps Your Credit

Using your credit cards regularly 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 pay the balance off in full or make the minimum payment.

Late Payments Won’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 lower your credit score. Making regular on-time payments is the best way to raise your credit score.

Having More than One Card Hurts Your Credit

Having multiple credit cards won’t lower your 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 can even improve your credit utilization ratio, a measure of how much credit you are using compared to how much is available to you.

Close Old Accounts Before Opening New Ones

Closing your oldest credit accounts can actually damage your credit. An older account means a longer payment history, and is the best way to demonstrate your responsibility as a borrower. This makes credit lenders more willing to lend to you, so you should only close your oldest account if you no longer need it.

A Higher Credit Limit Hurts Your Score

Unless having a higher limit will cause you to spend more than you can repay, it could actually help your score. An increased credit limit will improve your credit utilization ratio, which has a big impact on your credit score.

Prepaid Cards Helps Your Credit

Prepaid cards can be convenient to use, but they have no influence on your credit score. A prepaid debit card is most similar to using cash, just in card form. The card can only access the funds that are already loaded onto it. Since prepaid cards aren’t linked to any accounts or line of credit, they can’t help you with boosting your credit and will have zero impact on your credit report.

At Robins Financial, our credit cards work for you, which is why we offer the lowest rates possible, low to no fees, and great perks through the Scorecard® Rewards Program. View our rates and credit card agreement for more information, or apply online now or over the phone.

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