As you know your credit card controls your financial life. It creates your financial history (aka credit score) and summary of your financial habits that is accessed by financial institutions, banks, debtors, landlords and sometimes by your future employers to consider your candidature. Better credit score leads you to lower interest, flexible loan repayment schedules, less security deposit while a poor credit score can result in financial disaster.
Usually many people don’t follow healthy credit habits because they know about some credit card realities that are myths. These myths guide you to avoid credit score friendly tips with no reasons. Here is a list of such credit myths along with their truths.
# Closing credit card account will raise your credit score.
It is partially true. Credit score is prepared by viewing history of a credit consumer. In case you close a credit card account using for a long time will hurt your credit score. That is worse if you close a credit card account enjoying good credit score. In both conditions your credit score will be hurt badly. Actually it may be beneficial if you are closing a credit account that is started before some time and you are not using it too.
# Paying on or before time makes an immediate higher credit score.
This is true but in long duration. If you want to experience it immediately it is quite useless as credit score is based on credit habits during a long period instead a short span of time. Of course that will help you still it will take enough time to be reflected in your credit score. Meanwhile if you over cross other credit rules paying on time may be useless thus you should count each and every factor to maintain a higher credit score.
# You can pay unlimited with a no-limit credit card.
Firstly there is no such card having no-limit credit. Secondly if you hear about these cards, that are false. Indeed these credit cards maintain a higher credit limit as a reward for better credit score in the past. It varies from card to card as per type of card, credit limit, balance in credit account etc. You can also avail them but they offer a higher credit limit instead no-limit credit.
# Accessing your credit report hurts your credit score.
It may be if it happens repeatedly in a short span of time unless it does not matter too much. Your credit report is accessed by possible lenders, bankers, landlords, employers to decide your financial future, furthermore you have right to get it once in a year with neither fee nor side effect so it does not make any sense.
# Your credit card starts to show credit report only after activating it.
Absolutely not, credit card companies start to trace your activities since approving your credit card even you can view your credit report just after some day of receiving a new card. It does not matter you have activated or not credit report features.
# Credit bankruptcy is ok to get rid from credit card debt.
Probably not, bankruptcy does not help you to get rid from debt but it reduced amount of interest and repayment instalments to repay your debt comfortably since you have to pay all debt whether you want or not. Furthermore bankruptcy cuts off some of your legal financial rights without which you can’t survive or can’t get new loan if required.
November 30, 2011
Credit Cards