Credit cards are a modern necessity, but you don’t need the credit card myths that come with them!
It’s easy to fall for credit card myths, but it’s important to stay well-informed. For that reason, here are four of the most common credit card myths and the truth behind them!
1. Obtaining your credit report is expensive and unnecessary.
This is a particularly dangerous credit card myth, because you won’t realize it’s untrue until it’s already caused you damage! Many credit reports contain mistakes. Up to 25% of the time, those mistakes are serious enough to cause loan or credit applications to be denied.
It’s up to you to check your credit report for accuracy and address any mistakes. Fortunately, this is easy and inexpensive: the U.S. government allows each person to order a copy of their credit report free once a year.
Better still, you’re entitled to a copy from each of the three main companies: Equifax, TransUnion, and Experian. It’s important to order a copy from all three companies: creditors will randomly select where they order your report from, and there may be errors on one company’s report that don’t exist on another’s.
2. Applying for many credit cards is a good way to make sure you get one while building your credit rating.
There are two types of credit checks listed on your credit report: hard inquiries and soft inquiries. A soft inquiry occurs when no one’s really checking up on you — for example, when you request your own credit report. A hard inquiry occurs when you apply for credit and the creditors pull your credit record to check your reliability. Soft inquiries do not count against your credit rating. Hard inquiries do.
That’s why this credit card myth is such a problem: every single time you apply for a card, the company conducts a hard inquiry, which registers as a black mark on your credit report. It’s fine to apply for a variety of cards, but don’t get nuts about it.
3. The best way to build credit is by paying your balance in full each month.
Consider: if you pay off your balance in full, your credit report reflects one full payment. That’s it. You have no further credit history, which means no record of regular, accurate payments. This credit card myth makes sense on some levels: no one wants to carry debt. But occasionally maintaining a small balance on your card while making regular payments establishes a strong history of good credit, increasing your rating! And be sure to always pay your bills on time.
4. Shopping online leads to credit card and identity theft.
This is only true if you’re foolish with your information. Obviously, it’s your responsibility to make sure that the site you’re shopping from is a real site. Many online stores these days have ratings or belong to voluntary online business watchdogs which assure you of their legitimacy.
When you transfer credit card information through these organizations, the information is encrypted. Big name shops want your return business whether they’re online or not, so they’ll do anything in their power to protect your information. If you’ve never heard of the store, it’s worth your time to do a quick web search before purchasing. If they’re crooks, someone will know about it.
Use your brain and don’t let these common credit card myths fool you!