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6 Credit Card Myths Debunked

It’s easy to find information on why credit cards are dangerous and how they can harm your credit. However, one of the problems with a lot of information consumers get is that it’s simply not true. At Oklahoma Central Credit Union, we want to make sure you are fully aware of some of the common myths about credit and credit cards.

Myth #1 You're Damaging Your Score by Checking Credit

Blog 6 Credit Card Myths DebunkedConsumers are encouraged to check their credit annually. This allows you to review all information submitted and determine whether it is accurate. Pulling your own credit report does not impact your credit score because this is considered a “soft pull” versus a hard pull that is done when you apply for a new credit line or credit card. Visit annualcreditreport.com to obtain your free annual report.

Myth #2 Paying Off Credit Cards Removes the Reporting History

Some consumers believe if they’ve had a history of late payments and they pay off the card the entire history is removed from their credit report. This is inaccurate. Late payments continue to show up on your credit report even after the card is closed and paid off. Payment history is one of the most important factors in your credit score.

Myth #3 Applying for New Credit Harms My Credit Score

While your initial application may cause your credit score to tick down slightly, if you’re approved and you use your credit cards wisely, over time your score should actually improve. Applying for numerous cards in a short period of time can cause harm, but most inquiries only cause temporary dips in your credit score.

Myth #4 Over the Limit Amounts Are Not a Big Deal

Actually, they are significant because they give the impression you are not handling credit responsibly. Consumers are under the impression if they pay off over the limit amounts immediately they are not harming their credit score. Credit card companies often increase your interest rate and/or charge steep over-the-limit fees. While you may not do lasting damage to your credit, you could be paying in other ways.

Myth #5 Canceling Cards Will Boost My Credit Score

Use caution when falling for this common myth. If you have no outstanding balances or low outstanding balances on most of your credit cards and you cancel one you probably will be fine. However, if you cancel a card and your credit “utilization” goes higher as a result, your credit score could suffer. Overall, it’s a good idea to keep your total outstanding balances at about 30 percent of your total available credit. Cutting up cards doesn’t cancel them, while keeping them may give you a better shot at boosting your score.

Myth #6 Making the Minimum Payment is All That’s Necessary

Keep in mind, minimum payments are going to mean you are paying your debt over a longer period of time. Additionally, thanks to interest and new charges, you could quickly find you are in over your head. Consider paying more than the minimum payment monthly and you could find your credit score increasing as your balance decreases.

Credit card debt is manageable if you learn proper financial planning techniques. However, if you fall for some of the most common myths about credit scores and credit card debt, you could be putting your credit rating at risk.

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