Common Credit Card Misconceptions

In most cases opening a new single account will improve your credit score. This is just one of the many misconceptions that surround how credit cards work. Here is a look at some more of those misconceptions.

credit cards

I Pay the Balance in Full, So I Don’t Have Any Debt

The smartest ways to use a credit card is to pay the balance off in full each month so that you don’t have to pay any interest. This does look like that you aren’t incurring any debt, but a credit agency will see it differently and report it.

The bank will report your current balance as debt even before you have got your statement. This why you need to think carefully when swiping you credit card.

If your balance is reported the day after you have paid in full, the bank will still report all of the charges made since you’re last statement period ended. Your credit score will not be affected if the amount that is reported isn’t a large percentage of your credit limit.

Your Credit Score is Hurt with a New Credit Card

When you apply and get your new credit card there are two things that happen that will affect your credit score.

The first is that there is a request made for your credit history called a pull. A pull made every now and then has a negligible effect on credit. If there are too many pulls in a short period of time will give the impression that you are facing financial issues. When you are permitted additional credit it will your credit utilization ratio is lowered as long as you do not incur more debt.

A lower ratio will help your credit score and many say that their credit score does increase slightly when they get a new card but do not ad to their debt.

Cancelling your Credit Cards will Help your Credit

It can be quite easy to get into credit card debt. As a response many people will cancel their cards in the hope that it will help with their credit history. It does work, but should only be a last resort to keep you from adding more debt. However, closing your account will hurt your credit score.

This is because your credit utilization ratio is increased when you reduce your available credit without reducing your debt.

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