Three Credit Score Myths That Are Wildly Untrue
Author: Camilo Maldonado
Sydney Enzler opened her first credit card when she was a 19-year-old college student. Her mom encouraged her to open the account in order to build credit and establish a strong credit score.
“I wanted to use my credit cards every once in a while to build credit, but I generally just use them for larger purchases,” said Enzler.
Now 24 years old, Enzler is one of the millions of Americans who owe a collective $1.1 trillion dollars in credit card and other revolving debt. According to the Federal Reserve, the average interest rate on those credit card balances is 16.97% APR.
With interest rates that high, it’s easy to see how credit card debt can quickly spiral out of control and leave you with a bruised wallet – and ego. The reality is that credit cards aren’t going anywhere, and they play a large role in determining your credit score – a critical factor when it comes to getting the lowest possible interest rate on your mortgage or other loans.
Today, I am dispelling three common credit card myths so that you can focus on the things that will actually improve your credit score.
Myth 1: Carrying A Small Credit Card Balance Is Good For Your Credit
I applied for my first credit card shortly after my 18th birthday and I remember being told by a well-meaning colleague at work that I should try to use the card regularly and carry a small balance. The rationale was that by using the card and paying a small amount of interest monthly, the bank would love having me as a customer and give me a better credit score.
Fortunately, I was a curious teenager and fact-checked that claim, because it’s not true. And not following that advice has saved me hundreds, if not thousands of dollars in unnecessary interest charges over the years.