It’s a Lie. Seven Myths That Will Cost You Tons of Money

Credit score. This figure can be quite nerve-racking, especially if you fall in the lower category. Even more frustrating is when you try and improve your score. You clear your student loan, and your score remains stagnant. You lower your utilization ratio, and still nothing happens.

With such frustrations, it’s no surprise that there is a rise in misleading myths and misconceptions on how to improve or build your credit. You might have been a victim of this misguided pieces of information, but this article will debunk most of them.

  1. Build Your Credit Score with Credit Card Balance

It will cost you quite an amount if a small balance is transferred from one month to the next. However, according to NerdWallet, 2 out of 5 Americans believe that credit card balance can improve their scores. Another 1 out of 5 people believes it’s harmful to your score. Though.

These thoughts can be traced to the misunderstood tip that advises people to use their credit to get impressive credit scores instead of not using the card. Credit card companies will report your card balance to the reporting agencies at least once every month.

It’s better to use up the credit on various utilities to enjoy the benefits of an improved score. Going into a new month with balances on your credit card will only cost you money since it accrues interest.

  1. You Only Need Credit When You Want to Take Out a Loan

Getting a mortgage, a credit card or other type of loans depends on your credit score. The higher the score the better loan terms you’ll get. A good score can also get you a better cell phone service, your dream apartment, and even the type of car insurance you get.

NerdWallet conducted a survey and found out that 1 out of 4 Americans have no clue on how a poor credit can hinder someone from getting an apartment or limit their cell phone service options. Most of the time, people with a bad credit will have to contend with sky-high options.

In addition, another survey showed that at least 50 percent of Americans have no idea that their car insurance depends on their credit. With a bad credit, you will have to settle for the expensive terms on everything. Therefore, it’s important to get a hold of your credit report to know where you stand.

  1. Everyone Starts with a Stellar Score

Did you know that at least 1 out of 10 Americans believe they start life with a stellar credit score? They also think that their failures are what brings down the scores. However, that is false. On the contrary, credit scores start from scratch. You have to build your score upwards.

How can one get a stellar credit? Five elements will go into constituting your score:

  • Your credit history
  • Credit utilization
  • Payment history
  • New credit
  • Types of credit

If you are trying to build a score or repair it, you need to pay attention to number 2 and 3 since they have the biggest impact.

  1. Don’t Apply for a Credit Card

Many people have bought into the false and misleading myth that credit cards will work against you. They say that you’ll only pile up debt you can’t pay up. While it’s true some people don’t have the discipline to take care of their credit appetite, there’s a good number that can handle credit cards.

In fact, if you are responsible, you can use your credit card to build a stellar credit history. Debit and prepaid cards, however, have no effect on your credit history.

If you consider yourself responsible and disciplined, you can get a credit card to help you build or establish a credit history.

  1. Don’t Get Too Many Credit Cards

Sometimes this is true, but only if you think you’ll forget about others, pile up too many debts, or you’ll get overwhelmed. If this is the case, then it’s better to stick with a single card.

On the other hand, if you are financially responsible and organized, then you can go for multiple cards. However, it’s recommended that you hunt for cards with favorable terms and those that suit your lifestyle.

  1. Don’t Increase Your Credit Card Limit

If your lender offers you the same day cash loan to increase your limit, turn it down, run, and never look back. They are trying to get you into more debt. This is incorrect. The only person who should be worried about is the one with irresponsible financial behaviors.

One of the elements that contribute to your FICO score is credit utilization, which takes up about 30% of the overall score. More debts mean a lower score. An ideal ratio should be lower than 30%. Let’s take a look at a practical example:

If the limit is capped at $5,000 on your credit card and you have a debt of $2,000, your utilization ratio will stand at 40%.

If you increase your limit to $7,000 with your debt level remaining the same, at $2,000, the ratio will drop to 28% which is a good score.

  1. My Credit Score Will Take a Hit If I Open a Credit Card

It will take a hit, but only by a few points, about 5. Let’s say you have a score above 700— you can see the score will remain in the safe zone.

If you fall between 500 to 600, double your efforts in building your score. Besides, you won’t qualify for a credit card with favorable terms.


I'm a mother of 2 who likes to get involved in too much! Besides writing here I started a non-profit, I'm on the PTO board, very active in my community and volunteer in the school. I enjoy music, reading, cooking, traveling and spending time with my family. We just adopted our 3rd cat and love them all!

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