1. Myth: Applying for a credit card only affects your credit score if you use the card.
Fact: Applying for new credit comprises 10 percent of your credit score. It doesn’t matter if you’re approved for the card or if you use it; it’s the inquiry that counts. Frequently applying for new credit can hurt your credit score, so make sure you really need that new card before you apply for it.
2. Myth: Paying less than the minimum payment on your credit card bill doesn’t count as a missed payment.
Fact: If you don’t pay the total minimum payment on your credit card bill, your credit card company may report it as a missed payment. This can bring down your credit score and make it more difficult to qualify for credit in the future. Check your statement for the minimum amount due, and be sure to pay it on time to keep your account current. And remember: Paying more than the minimum amount due is a great way to pay down your debt.
3. Myth: A high credit card limit can be a bad thing.
Fact: Not necessarily. If you manage your credit cards wisely, a high credit limit can be advantageous. Thirty percent of your credit score is based on your debt-to-credit ratio (the amount you owe in proportion to your total credit limit). If you have a high credit limit and you keep your balances low, your debt-to-credit ratio is also low, which can help your credit score.
4. Myth: You must carry a balance on your credit cards to build a credit history.
Fact: Credit cards are great tools for building your credit history, and you don’t need to carry an unpaid balance to do so. Your best strategy is to use your credit cards and pay off the bill in full each month, so you keep your overall debt-to-credit limit ratio low.
5. Myth: The more credit cards you have, the better.
Fact: Having more credit cards isn’t necessarily better. Ten percent of your credit score is determined by the type of credit you have. For example, you may have student loans, a mortgage and credit cards. Credit agencies look for a good mix. If all you have is credit cards, you may not help your score.