Hi,today were going to be talking about something that, We think is one of the scariest parts of personal finance, and I don’t just say that as someone who ruined her own credit would have these at eighteen and that’s credit cards.
But when it comes to money like with most other things in life, knowledge is power and really understanding credit cards can make them go for something that’s in amid eating and scary to something that you can actually use to your advantage.
Shall we spoke to a personal finance professional to find out some of the biggest myths about credit cards and the truth behind them, so that we can all understand them and really get over our credit card. Fear summits.
Number one is that making the minimum payment is enough. Now this is true, because what can happen is that you’re left with a pretty size as well balanced when set very low, introductory interest rate expires in short, keeping a running balance can be the interest payments, add up very quickly, and it’s also good to remember that the higher percentage of your available credit that you’re using month to month, the worse, are going to look miss number to opening a new credit card will hurt your credit score for a long time.
So the short answer is opening. A new credit card does not hurt your credit score in most cases, but the truth is that it can impact your credit score in four important ways. Now. The first potential impact is that when you apply for a credit card, the lender performs what it’s called a hard inquiry on to your credit score, which is generally what happens when you’re applying for a line of credit now to men.
Any of these heart increase in a certain period of time can negatively impact your credit score, because it can mean that a you’re really shopping around for a loan, because you’re not getting approved for one or b you’re.
Trying to borrow a lot of money at once saw a positive impact. That of credit cards can actually have on. Your score is having different types of accounts with your credit card. It’s because this show is lenders that you’re experienced and managing different types of credit.
Now the third impact- and this is another good one- is credit utilization and that basically means the gap between what you can do with your credit card, the maximum and what you are doing and a good way about opening another credit card might help you with this.
Is that, let’s say you’re already using a certain percentage of one card- it’s not too high, but it’s you know somewhere in the middle, and you open up another one so now you’re using even less on that first card, as well as not a lot of the second one.
That means your overall gap between what you’re using and what you could use is even better. The last impact that your cards can have is in length of time that you’ve had them know this one isn’t so much about. You know the number of cards you have or whatever, but it is good to keep in mind that having cards open for a longer time and using them responsibly is good for lenders, because it shows that you can manage your credit longer term now.
The third myth is that you need to carry a balance in order to improve your credit score now. This is totally untrue, of course, and what’s important is that you actually use your card and not that you were painted balance month to month so building credit history means that you can manage your debt responsibly over time, not that jay can simply keep a balance month to month. Accruing interest to miss number four is that interest rates are fixed now.
The truth is that, even though it used to be very common to fight is fixed interest rate cards, now, it’s relatively rare to find cards that aren’t at least somewhat variable in interest. Now. This is largely due to the twenty ten card act which stands for credit card, accountability, responsibility and disclosure, and you can read more about that act in the description. Miss him or five. Is that it’s okay to max out your credit cards no way out slowly under that is, of course not the case.
You don’t do not max out your credit card almost going to do as a crude dizzying interest payments and also show the lenders that you had a very high credit utilization which, as we discussed earlier, is not good.
Generally speaking, you should keep your credit utilization under thirty percent to avoid harming your credit score. So our last smith is a really big one and one even I believe we were researching the studio limbs that you only have one credit score false.
You have many credit scores and like ben and jerry’s, they come in many different flavors. Currently, there are two main models used to calculate credit score and the three major credit bureaus use. These two major models which are fico and vantage score, and this means that you’ll have both the vantage score and the fico from each at least three major spiro and lenders choose which model they’d like to use and within each scoring model.
There are multiple variations, so we hope that uncovering the truth behind no six credit card and will help you feel like they’re, not that scary, because in reality they’re not and will help you really see them as a tool to your financial advantage. To thank you, as always for washing and don’t forget, to hit the subscribe button to. There was the financial by a dot com for more.