It is not uncommon for many people to have some strange notions about Credit Cards. We bust some unfounded myths and tell you how to improve your Credit Score so that you can see your Credit Card in a new light.
It is not uncommon for many people to have some strange notions about Credit Cards. We bust some unfounded myths and tell you how to improve your Credit Score so that you can see your Credit Card in a new light.
Additional Reading: Tips To Improve Your Credit Score
Myth #1: Closing unused Credit Cards is good for credit
Your credit history makes a big difference to your Credit Score. Did you think it didn’t matter how long you’ve held a Credit Card account? Well, it does. The older your Credit Card account is, the better for your credit history. It gives you credibility among lenders. Remember, closing that old Credit Card account may do more harm than good to your Credit Score.
The length of your credit history constitutes 15 percent of your Credit Score. Think about this too: when you close a Credit Card, you reduce the amount of credit available to you. This decreases your credit utilisation ratio, which makes up 30 percent of your Credit Score.
What you can do: Keep the old Credit Card accounts open, especially the oldest ones that you have. Just remember to keep track of any applicable annual fees that you may need to pay.
Additional Reading: 10 Things That Don’t Affect Your Credit Score
Myth #2: Holding a Credit Card balance is good for credit
The outstanding due on your Credit Card makes up 30 percent of your Credit Score. Remember this: the lower your credit utilisation ratio (that is the amount of debt you hold compared to your total available credit), the higher your score.
Additional Reading: 5 Things To Know For First-Time Credit Card Users
Here’s a tip: Credit lenders advise that you should keep your credit utilization ratio below 30 percent. The lower, the better. A low credit utilization ratio tells lenders that you are more likely to be able to repay your debts. This positively affecting your Credit Score.
What to do: Pay your Credit Card dues in full every month. Try to maintain a debt-to-credit ratio below 30 percent across all your Credit Card accounts.
Additional Reading:Ways To Pay Your Credit Card Bill
Myth #3: Choosing a popular card will benefit you
You should choose a Credit Card that is perfectly aligned with your shopping habits. It’s not a good idea to get Credit Cards just for the rewards points they offer, if you aren’t much of a shopper. If you aren’t a frequent flier, skip getting that Airline Credit Card. Remember this: The Credit Card you choose has no impact on your Credit Score.
What to do: Stack up your present Credit Card against others and decide whether or not it’s time to find a new card that may be more suitable to your lifestyle.
Additional Reading: How To Choose The Best Credit Card For You
Myth #4: Believing there’s only one Credit Score
When looking for a way to check your Credit Score, go with a genuine Credit Score tool to find out where you stand.
Psst. We can help you find out your Credit Score, for free!
What to do: Find out which credit reporting agency is associated with the Credit Score tool you are using to check your score.
Additional Reading: All About Credit Score
Ready to find your perfect Credit Card?