There are many myths that try to point you in a different direction and often these myths are slim on facts, they are miss leading and can cost you money. Understanding the complex issues that surround a credit card and borrowing money is complex, but get this right and it will save you money on future credit and lower interest payments.
- If you pay off your credit card balance in installments thinking this will improve your credit rating, then you are wrong. The best way to improve you credit rating in these circumstances is to pay the balance off in full.
- Having lower limits on your credit card will improve your credit rating is another myth. It is actually better practice to have a higher limit but one that you never spend more than 70% of the amount available. This shows that you are responsible with credit and will improve your credit rating.
- Checking your own credit rating will not leave a footprint on the report and will cause no long-term damage to your report, if on the other hand you ask a friend to pull your credit report who works in finance then this will have an impact on your credit file.
- If a potential employer wants to check your credit report because they feel that if you are responsible with your own credit you will be trustworthy. This is inaccurate; there is no evidence to connect poor credit reports with trustworthiness in a job.
- It is important to realize there are different ways to compile a credit report and how to analyse the information. What is important to realize that any changes in how the information translates into your affordability of a loan could affect the amount of interest you need to pay and the rate offered.
- Closing accounts as soon as they become unnecessary is important. This is only true if you are not looking to get more credit in the near future. Having accounts that are sitting at a zero balance looks good on the report and works in your favour, if you are thinking about more credit it is often a better idea to wait until you have applied for the credit before closing the account. Alternatively, wait 6 months between closing accounts and applying for more credit.
Credit card use is a complicated area to know what is best for you, if you are looking at budgeting your money then paying off your debt each month is the best course of action. If this is not possible then think about the interest you are paying, consider reducing that with transferring to a 0% deal or a consolidation loan to reduce the amount of interest.
Getting the best deal for your debt is important and often people feel trapped, often this is not the case and there are alternatives that can help release the burden. One important area to consider is not to listen to myths that surround credit they can make you end up paying more for the debt.