Credit scores are often nebulous to those outside the financial industry. The process for calculating a person’s credit score seems very opaque, which creates endless misconceptions about how to help or hurt your credit score. As a result, many people have erroneous information on which to base very important decisions.

If you find yourself caught in an unfortunate web of credit card myths, you may want to extricate yourself as soon as possible to improve your credit score and financial stability. A fresh financial start can boost your peace of mind as well as your quality of life!

Common Credit Card Myths and Facts

Myth 1: It’s better to have more credit cards than fewer.

Fact: There’s nothing wrong with having several credit cards to choose from. However, opening credit card accounts too often can adversely impact your credit rating. The number of credit cards you have makes up roughly 10% of your score, so having an excessive collection of them may hurt you.

Reduce the number of cards you have for a credit boost that can also simplify your monthly budget.

Myth 2: To build a credit history, you need to carry a balance on your credit cards.

Fact: Your credit score reflects both your ability to pay your credit bills on time and how much of your available credit you are utilizing at that time. Carrying a balance on your card shows you are using your card, but it does not show you are making strides to repay all of what you owe. A high monthly balance can even give the appearance of irresponsibility to lenders.

Pay your balance in full each month if it’s possible. If not, pay at least the minimum amount. Better still, pay a bit over the minimum payment to reduce your debt. Your credit score will thank you.

Myth 3: A payment less than the total minimum amount does not count as a missed payment.

Fact: Credit card companies do not award points for effort. Any payment less than the minimum amount due may count as a missed payment. Your credit score will reflect both missed payments and late payments.

It is very important to make your credit card payments on time every month, and to pay at least the minimum amount. Paying the minimum amount plus a little extra is an easy, painless way to pay down your debt if you can’t pay the full amount due on the card.

Myth 4: You should avoid credit cards in favor of debit cards or prepaid cards.

Fact: Mismanagement of credit cards can lead to high debt and a poor credit score. However, contrary to popular belief, having a credit card can help you build your rating. Your ability to incur then repay debt is a large part of your credit score.

If you are easily tempted to overspend, reserve your credit card for purchases you can repay immediately. Then pay your balance and do not use the card until the next such expenditure. This will help you build your credit score as well as good habits.

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*Novation is not a financial advisor or consultant and strongly recommends that you speak to a lawyer or accountant before making any significant financial decisions.