10 Credit Card Myths That Put Your Score At Risk Myth #1

10 Credit Card Myths That Put Your Score At Risk

Myth #1: You Should Avoid Using Credit Cards – FALSE!

There are many finance experts out there that advise consumers to stop using their credit cards, pay off everything, and go to an all-cash plan. That may be a good way to get rid of debt, but it’s utter destruction to your credit score. Why? Because per Fair Isaac, the creator of the credit scoring system, there are 5 factors that make up your credit score, one of which is how you use and manage your credit card debt-a factor that makes up 30% of your score. That’s 255 points!
In order to prove to the scoring system that you know how to manage revolving debt, you MUST have active credit card accounts. Use your cards every month, for groceries, gas, etc. and pay them off every month. If you do not have a credit card at this time and your scores are under 650, you should consider immediately applying for a secured credit card. If your scores are high enough (ask your bank what the score requirements are), you may want to consider going to your bank to apply for a card. Exception: Do not apply for credit of any type when you are about to enter into or have already entered into a loan transaction. New Credit temporarily brings down your score due to the debt and the new account.



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