Debunking Credit Score Myths

There are several ways to boost your credit score, and the more techniques you know, the better off you are. However, there is also a lot of misinformation out there about credit. Read on for some common credit score myths and tips on how to improve your score.

Paying Bills Doesn’t Matter

Wrong. The biggest, easiest way to improve your credit score is also the most boring: Pay your bills on time, every time.

Payment history is the most important factor in your credit score. If you are late on payments, your score will suffer. Paying bills matters. A lot.

As Long as You Pay Some Debt, You’re Fine

Nope. Making minimum payments isn’t going to help you much. You want to have as little debt as possible. That means you need a low credit utilization ratio, which is your total available credit divided by the amount of credit you’re using. You want your utilization to be below 30 percent, even lower if possible.

The best way to lower your utilization is to pay off your credit cards in full each month. If you need additional help with credit card debt, you could try a balance transfer card. These cards allow you to pay off your debt without incurring interest charges. 

Closing Your Old Cards Improves Your Credit Score

False. The truth is exactly the opposite: You want to keep old credit cards open, even if you don’t use them anymore. Keeping paid-off cards open is good for your credit history, as it shows lenders you have a long history of on-time payments.

If an old card has an annual fee, contact the lender and see about switching to a different version of the card without the fee, so you can maintain a long credit history without additional fees.

Do One Thing: Pay bills on time each month, as this is the quickest, easiest way to improve your credit score. 

Source: Chris O’Shea, savvymoney.com

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