Debunking 6 Common Myths about Building Credit

Myth #1:

If you can’t qualify for traditional credit, go for no credit check. Some people think that if they can’t get approved for traditional loans and credit cards, that they should take any credit available. Offer set don’t require a credit check but prepaid cards don’t help build credit and other no approval needed credit like high interest rate short-term payday loans, can be really risky and they don’t count as a good type of credit. Debts like car loans and mortgages look good to creditors because they show you’re responsible, but if you can’t qualify for traditional loans and credit cards you don’t have to turn to no credit check types of credit. Instead get a secured credit card, you can open a small credit line with the cash deposit and you can use that to build credit by showing a positive payment history.

Myth #2:
Opening more credit lines the bills credit because you have more borrowing power don’t think that opening more accounts will help you build credit faster in fact opening too much credit in a six month period can hurt your credit score only open new credit lines because you need them for a strategic purpose and you know you can afford to pay the debt back.

Myth #3:

Zero balances are bad for your credit because it looks like you’re not an active credit user. Another myth is that if you have credit cards with zero balances banks won’t think you’re an active
credit user. Using a card and paying it off each month in full is the best way to handle credit in fact maintaining a credit utilization ratio of 30% or less is the best to maximize your credit score

Myth #4:

Close those old accounts that you don’t use. People often stop using old accounts in favor of cards with better rates or rewards you may think you should close those accounts but the length of your credit history is important. Keep your oldest accounts active with small transactions that you pay off every month and you’ll keep your credit history looking long and strong.

Myth #5:

Late payments aren’t that big of a deal as long as the account isn’t charged off. Payment history is the number one factor in your credit, it accounts for 35% of your credit score calculation. Every payment that’s more than 30 days late becomes a negative remark on your report that sticks around for seven years. The best thing you can do to build credit is to make timely payments on all of your debts, and if you’re facing bad credit because of past mistakes, be sure to make timely payments starting today and bring delinquent accounts current.

Myth #6:

Good credit takes a long time and high income good credit is achievable regardless of your income or net worth with on-time monthly payments and keeping your debt to a minimum you can achieve better credit in about six to twelve months.