Common Credit Card Myths Damaging Your Credit Score

The biggest significant indicator of your creditworthiness is your credit card rating. If anyone asks for a loan, a fresh credit card, a house loan, etc., the lender will check their credit score to determine whether or not they are a secure bet. So, it’s important to keep your credit score high. Credit cards provide their customers not just a credit limit but also a variety of promotions and rewards. However, when talking about credit scores there are many myths that can damage your credit score, let’s see in detail what they are.

Common Credit Card Myths Damaging Your Credit Score

Myths damaging your credit score:

 

1.Your credit rating will benefit from carrying a balance on the card:

The majority of individuals believe that carrying an amount on their credit card instead of settling it off fully is advantageous for their rating. However, if the balance exceeds a significant portion of your credit card limit, it may actually hurt your credit rather than benefit it. The reason for this is that as your credit utilization rate rises, it paints a negative picture of you in your credit file, the lower the credit utilization ratio the better for you and your credit score.

2.To obtain the highest possible rating, you should completely eliminate using credit cards:

Now, the above point should not be misinterpreted, using less percentage of your available credit does not mean not using your credit card at all. If you do not use your credit card at all it will not help your rating at all. A preferable approach is to occasionally use credit cards, without carrying large balances or paying exorbitant financing fees and settle your bills on schedule each month. Frequent use will demonstrate your proficiency in responsible credit usage. Your rating would rise as a result of doing so and promptly repaying the associated obligation.

3.Your credit score will benefit from closing a credit card that you hardly use:

This is another widespread myth, closing a credit card that you do not use will not benefit you at all, it will only shorten your credit history and that is not a good thing, a longer credit history shows creditors that you are a reliable investment. Your credit rating may be impacted by shutting a card in 2 different ways: by raising your credit utilization rate and lowering the average length of your accounts.

4.Compared to credit cards, debit cards offer more security:

The idea that debit cards are more secure than credit cards is another one that hurts your credit score. The truth is credit cards are just as secure if not more. Using debit cards for transactions will not help your credit score even a bit, therefore if you use a debit card for your transactions your credit score will remain the same.

5.Paying only the basic minimum is sufficient:

As much attractive as paying just the minimum amount looks it is not at all recommended. Paying the minimum amount causes interest to add on the remaining balance and thus you never get rid of the debt, because as the amount payable increases it becomes harder and harder to pay the amount back, which leads to missing payments or late payments which in result causes your credit score to decline.

Also read: How to Choose the Best Credit Card

Bottom Line:

Your credit rating can be improved by having the proper knowledge. It’s crucial to learn helpful information, but it’s just as important to unlearn false information. Credit cards can be a useful technique for consumers to raise their credit ratings, however, they also carry some risks. If you utilize them wisely, you may boost your credit score while also taking advantage of the added protection and benefits credit cards provide.

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