As a personal finance writer and a rewards credit card user, I often hear crazy credit myths from others. Many don’t fully understand how credit cards, credit, and debt work, and today I would like to share these common myths with you.
1. I make a good income so my credit score has to be high.
This is something that I have heard far too many times. Many people think that they can’t get a good credit score because they don’t make enough money. Others automatically think that their credit score is good because of their high income.
Both of these types of people are wrong!
Your credit score does not take in account how much money you make. Your income has nothing to do with your credit score. I have seen people who make high salaries and have horrible credit scores. I have also seen those with low incomes have great credit scores.
2. I don’t need a house or car, so I don’t care about my credit.
This always kills me when I hear that. It’s not hard to watch your credit score and increase it. It may be hard in the beginning, but over time you get used to it and it just comes naturally (such as paying your bills on time).
Your credit affects many other areas of your life, not just whether or not you can get a house or a car. It can also affect whether or not you get a job, your car insurance rate, and more. Getting a loan means that you want to think about your financial future.
3. People with credit cards all have debt.
I frequently use credit cards for their rewards (okay, I do it all the time), and that means that I have multiple credit cards. When I first started doing this, I had many people asking me if I was drowning in credit card debt.
No! You can responsibly charge expenses on your credit card and not go into debt.
4. Paying the minimum payment is enough.
I can’t believe people still believe this one, but people do. I have come across many people who pay only the minimum payment on their credit card or other debt accounts each months, and they genuinely believe that the minimum payment is all they have to pay and that interest won’t stack up.
That is false! Unless your interest rate is at 0%, interest will stack up. It’s almost ALWAYS best to pay off your credit card balance fully each month.
What credit myths have you heard?
Image via Flickr by StormKatt