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If you are able to prove that you have the ability to use credit responsibly, you will be rewarded with additional credit opportunities.
If you are looking for a line of credit or loan for a million dollars, first you have to show that you are able to manage a thousand dollars.
In the article by Jason Steele, he discusses the most common credit card myths.
1. Credit cards only lead to debt.
It’s true that some people have serious problems with credit cards, but it doesn’t mean that everyone should avoid them. Used responsibly, credit cards help you build a strong credit history, which can result in favorable rates and terms when you apply for a car loan or a home mortgage. Some cardholders never pay interest charges by paying their balances in full every month.
2. You can build credit with a debit card.
Yes, you have to supply your name, address and Social Security number to get a debit card, but how you use one won’t really help or hurt your credit. Because a debit card doesn’t represent a loan in any way, it won’t even appear on your credit report.
3. Closing your credit cards will increase your score.
This myth is very common, but it’s also completely false. Your credit score improves when you have a strong credit history of on-time payments and a low level of debt (check out these credit cards for people with good credit scores). But by canceling cards, you curtail your credit history. In addition, each time you close an account and lose available credit, you increase your debt-to-credit ratio. As that ratio rises, your credit score falls. (You can see how your credit card balances are impacting your credit score for free each month on Credit.com.)
4. It will wreck my credit if I apply for a new credit card.
This myth is false for the same reasons that lead people to believe closing their credit cards will help their score. Opening up a new credit card account increases your credit history over time, while reducing your debt to credit ratio, both of which can help your credit score. Nevertheless, it’s true that opening up a new credit card will temporarily hurt your credit score, but the effect will be minor and your score essentially ignores the inquiry entirely after a year.
5. You need to carry a balance to build credit.
You can avoid interest by paying your entire statement balance in full, and it won’t hurt your credit score. Again, you help your credit score by having a strong record of on-time payments and a low level of debt, so paying off your debt each month can only help your score.
(NOTE: We recommend that you leave a minimal balance on your credit card. Leaving a minimal balance on your credit card ensures that your credit card is reported every month. Some providers stop reporting your card if it does not have a balance and this can affect you negatively by not showing that you actually a payment history or ability to manage your debt. Paying off your balance quickly before reporting may turn your credit card into an unreporting debit card.)
6. You can’t get a credit card after you’ve been in bankruptcy or foreclosure.
Those who give up on credit cards after they’ve had serious problems with their credit will have a very difficult time rebuilding their score. While you won’t be approved for most standard credit cards, you can qualify for a secured credit card. These credit cards work much like unsecured cards, but it requires the a refundable security deposit before your account can be opened. But when you make on-time payments each month, you can quickly rebuild your credit and qualify for a standard credit card, often after about a year.
In addition to following the steps indicated by Credit.com, we recommend that you head on over to www.OptOutPrescreen.com. This website is part of the Patriot Act and with it you can remove yourself from the national marketing system.
Why do you need to remove yourself at Opt Out Prescreen?
Credit Card providers and other companies are running your credit each and every month without your authorization. Eliminate the credit hits from credit cards you never requested or even obtained.
Bonus credit video:
Original article:
http://blog.credit.com/2016/04/6-credit-card-myths-that-can-keep-you-from-good-credit-140759/
