Discover credit card facts that everyone has some theory about. The difference between facts and myths can be blurred since there is a lot of information about credit cards.
We wanted the find out true facts and myths about credit scores, and to share with you what we found. We discovered some misinformation being passed around on the internet and here we are going to separate facts from myths.
Discover credit card facts that can be useful when dealing with the banks
Fact: A new Unused Credit Card Will Affect Your Credit Card
You probably heard that only if you use a new credit card that the account will have an impact on your credit card score. That’s not completely true. If you apply for a new credit card it will compromise 10% of your score. It’s not important if you use a card or if you don’t use it, the inquiry of having one counts. So, if you want to have another card, think do you really need it.
Fact: Paying Less than Minimum is Treated as a Missed Payment
If you pay less than a minimum payment, your credit card company might treat this as a missed payment which can bring your credit score down and make it difficult to qualify for any credit in the future. You should always check your statement for the minimum amount and be sure to pay at least that amount. Of course, paying more than a minimum amount will get you out of debt sooner. Here, it’s important to find the best possible financial solution for you that will serve you in a long run.
Fact: Your Balance has more than One Interest Rate
Your account might include balances with different interest rates for example one rate for a balance and one for a cash advance. This is another good reason to pay more than a minimum amount because when you do, a credit card company will apply any amount above the minimum to the balance with a higher rate which can help you reduce the debt more quickly. You should think in a direction to reduce the debt as sooner as possible.
Fact: Your Card is not Paid off if You Pay Only Your Balance
Yes, your card is not paid off fully if you pay only the balance. You still might accumulate interest even when you reduce the balance to zero. This is a residual interest and it’s due to the gap between the date on which you were billed and the date when you made a payment. If you want to avoid residual interest, you should call your credit card company and ask for a calculation of the amount owed on the date when your check will arrive or when your online payment will be processed.
Discover credit card facts – here are the most common myths
Be mindful of myths as this type of information might have a negative impact on your financial choices.
Myth: Only Credit Cards with a Balance Can Help Your Score
Having and using a couple of credit cards, and paying off the balances in full each month, will result in good scores. Be sure, though, you know the due dates as well as you know your spouse’s birthday. One late payment can mess up years of work. It’s not enough to have credit cards with a balance that can easily help you with your score.
Myth: You Can Get your True Credit Score Free Anytime You Want
Yes, we’ve seen the ads and heard the jingle. The “free” score that you will receive is available with the purchase of a costly monitoring service. The snapshot scores can give you a general idea of where you stand but you can get a comprehensive FICO from myfico.com for $20.00. Nothing is for free. You can get your true credit score but there is a fee for it.
Myth: You Probably Only Want Two Credit Cards. Three at the Very Most
This is one that really has changed in the last 20 years. The belief used to be if you had five cards with a $5,000 limit each that you would be 25 large in debt by lunchtime tomorrow.
Credit score scientists have discovered that people who have handled credit responsibly in the past don’t tend to go bonkers overnight. Having many credit lines is now considered a good thing because lenders who have reviewed your financial situation have entrusted you with these accounts.
Myth: Once You Have a Credit Account Open You Must Never Close It
Closing an account will likely not help your credit score over the short term, and you don’t want to close an account if you have little credit history on which a credit decision can be made. Is this true?
Closing one account is unlikely to have a big impact, especially if you have plenty of other accounts that remain open. It often makes sense to keep open your highest-limit credit cards, since those have a strongly positive effect on your overall credit profile. Lenders pay close attention to how close you are to the limit on your cards. That’s called your “credit utilization ratio.”
Raising a low credit score isn’t hard, but it feels hard because it takes time. Making sure you are informed is crucial for your financial decisions. Paying your debt in a timely manner will help you in a long run.