The truth about 10 credit card myths - KSLA News 12 Shreveport, Louisiana News Weather & Sports

The truth about 10 credit card myths

© / Marcus Clackson © / Marcus Clackson

By Andrew Housser

People routinely rely on credit cards to cover travel, emergencies, major expenses and even daily costs. In fact, 70 percent of Americans have credit cards. Of those who have them, most have three or four cards in their wallet.

Using credit cards responsibly can help build a stronger credit profile. Strong credit, in turn, can help people make purchases, such as homes or cars, and obtain the best interest rates possible. Strong credit also can impact the ability to rent an apartment, lease a car and even get a job. To get the benefits of strong credit, it is important to understand and use credit cards wisely. Check your credit card smarts to see if you know the facts about these 10 credit card myths.

Use a debit card or prepaid card to build credit. A debit card can be very useful to avoid going into debt, since it withdraws money directly from your bank account. If you do not have the money in your account, you cannot spend it. Similarly, a prepaid card only lets you spend what is loaded on the card. But activity on these cards is not reported to the credit reporting agencies. Therefore, your behavior on these cards cannot be used to build your credit history and in turn, your credit score.

You cannot have good credit without a credit card. Using a credit card responsibly can help build a credit score, just as using a credit card unwisely can destroy your credit. Yet the credit reporting agencies take a comprehensive look at a consumer’s entire credit history. They do not focus solely on credit cards. How you repay your car loan, mortgage, and student loans also can have an impact on your credit score. In fact, having a good mix of credit is generally viewed as a good indicator on your credit report.

Everyone carries credit card debt, so it will not hurt you. Just because friends or relatives are in debt does not mean it is a good thing. As many people learn the hard way, debt can snowball into an unmanageable burden. The credit industry has consistently found that consumers with higher amounts of credit card debt are more likely to default on credit obligations than those with lower amounts of credit card debt. A good piece of advice for strong credit is to only charge purchases that you can repay in full at the end of every month.

Carrying debt helps credit scores. You do not need to carry a balance, month to month, to build your credit score. In fact, you will do best by paying off a credit card, in full, and on time, every month.

Making minimum payments will get you out of debt. Technically, minimum payments – with no additional charges – can repay a debt eventually. But take a closer look at the box on your credit card statement that tells you how long you will pay. Paying more than the minimum will help you repay the debt months or years sooner. You also will reap major savings on interest charges by paying down your bill faster.

Closing unused credit card accounts helps your credit score. Closing unused credit card accounts is not a good strategy to improve your credit score. This is because of credit score utilization, which is the amount of your available credit that you use. In general, the lower your credit utilization, the better your credit score.

Opening a credit card will not harm your credit score. If you are searching for credit – such as when comparing options for a vehicle or home loan – the impact on your credit score will be minimal (generally less than five points per inquiry). But opening a new credit account can have a negative impact. The credit reporting agencies consider consumers who open new accounts riskier than those who do not. It is not necessary to have multiple credit cards to establish and build good credit.

A zero-interest promotional offer is the best financial solution. In some cases, a promotional offer where you pay zero interest for six, twelve or eighteen months can be helpful. For instance, an offer might give you breathing room if you need to purchase a new kitchen range. Instead of paying up front, you can pay it off over twelve months with no added interest fees. The promotional rate does not last forever, though. When it ends, you must pay interest on any remaining balance. Opening a new credit account can negatively impact your credit score, too, so it is important to balance that against the benefits of the promotional rate.

A late credit card payment will haunt me forever. Payment history accounts for 35 percent of a credit score. A recent – or severe – delinquency can certainly have a substantive impact. But if it is mild and isolated, it will play less of a role over time. Eventually, it will even be purged from the credit report and no longer factored into the score.  The message to consumers is to get current with your payments immediately. Then, as you repay debt responsibly, your credit score will recover over time.

If you cannot pay your credit card bills, bankruptcy is the only option. Bankruptcy is stressful and hard to qualify for. If you are deep in debt, you have other potential solutions. Credit counseling and debt management programs can offer a lower monthly payment. Debt negotiation (settlement) may be able to lower your principal amounts due. You may be able to borrow from family members or take a home equity loan. Consider your options carefully before committing to a solution.

To learn how your credit card and other credit usage are affecting your financial history, be sure to review your credit reports once a year. Everyone can order a free copy of credit reports once per year at

Andrew Housser is a co-founder and CEO of, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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