"No man's credit is as good as his money." - E.W. Howe

7 Credit Card Myths

By , November 11th, 2011 | 5 Comments »

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You know your credit is an important part of your financial life. Indeed, a number of people, from bankers to insurers to landlords, use your credit score to determine your financial fate. From higher interest rates and insurance premiums to paying a higher security deposit for a rental, a poor credit score can cost you.

It’s important to understand how your financial actions impact your credit score. Unfortunately, there are some rather persistent myths floating around out there. Here are 7 credit myths — and the truth:

Checking Your Own Credit Score will Harm You: There are plenty of people that still worry that checking their own credit will harm their scores. However, this isn’t the case. You can check your own credit, including your credit score, as many times as you want, and it won’t impact your score. You are entitled to know where you stand, and you won’t be penalized for checking your score.

The only time a credit check affects your score is when you request that a lender or other financial services provider check your score, usually (but not always) because you are applying for credit.

Closing a Credit Card Account will Raise Your Score: Actually, in the short-term, closing that credit card account can actually hurt your credit score. This is because your score includes credit utilization and your available credit. If you close a credit card account, all of a sudden, you don’t have as much available credit. If you still have balances on other credit cards, it immediately boosts the ratio of used credit to available credit. A higher credit utilization can lower your credit rating.

Paying Off Your Debt will Immediately Raise Your Credit Score: While paying down your debt can help your credit rating, it doesn’t usually do so immediately. It can take anywhere between 30 and 90 days for your credit score to begin to improve once you start paying off debt. Realize that your score will improve further if you build a longer history of lower debt. But you won’t see immediate changes, especially large ones, just because you pay down your debt.

As Long As You Pay Off Your Cards Each Month, You Will Have a Good Credit Score: This isn’t always true. In some cases, if you consistently come close to maxing out your credit cards, you could be dinged a bit on your credit score, since your report will show a consistently high credit utilization rate. This is especially true if creditors report to the bureaus during a part of the month that your credit card balance is high. Also, realize that other factors, such as a short credit history, or the presence of “undesirable” loans (like payday loans) on your credit report can hold your score back a little.

You Can Charge Whatever You Want on “No Limit” Cards: Even though some credit cards don’t have pre-set spending limits, it’s important to realize that these aren’t blank checks. At some point, you are likely to be cut off. Also, realize that many cards that don’t have pre-set limits are actually charge cards; you have to pay those off each month, regardless. As a result, your de facto limit is what you can afford to pay off every month.

ID is Required when You Use Credit Cards: According to Visa and MasterCard, your signature on the back of the card should be enough for the stores. While some stores request to see your ID as a security measure, this isn’t required by credit card companies and issuers. Also, note that writing “see ID” on the card doesn’t make it valid. Credit card payment processors actually want you to sign the card.

Your Credit Card Won’t Show Up on Your Report Until You Activate It: Unfortunately not. Your credit card will actually show up a couple of days after you are approved. Whenever the credit card issuer reports the approval to the credit bureaus is when it shows up — activated or not.

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  • Noel says:

    Where do you check credit score? I know that you can check your credit report on I think, annualcreditreport.com (?)but they don’t provide you with your credit score. I was also informed recently that your credit score changes on what kind of loan you are applying for i.e. car loan or mortgage or credit card. Any pointer for getting a credit score?

  • Briana @ 20 and Engaged says:

    I didn’t know it could take up to 90 days for your credit score to increase when you pay off debt. I’ll keep that in mind the next time I have a big payment.

  • Nathan Johnson says:

    I know there is a law allowing all of us to access our credit score once a year for free. It was put into effect a long time ago.

    A quick Google search and it looks like this is the site:

    I like the points made here, especially about NOT cancelling your credit cards. ESPECIALLY the older ones. Keep ’em! It helps!

  • Richard says:

    I am a retired police officer. Like everyone else I too have credit cards and spent some time as an investigator as well. One of the best fraud investigators I ever knew, who has since passed on, told me years ago after interviewing a suspect on credit card fraud the following,” Anybody can sit down and trace a name especially on the back of a signed credit card, write it 20 times and make a near perfect match.”

  • Richard says:

    Here’s the continuation of a bove. (I accidently hit the submit button.) When writing someone’s name or copying it 20 times you usually can make a good fake signature. ALL of my credit cards say SEE ID in the signature block. Not once have I been questioned about not having my signature on my credit cards. When the business sees a picture on a driver’s license or employment picture also, and another credit card with your name IMPRINTED on the front they do not question me but 99% of the time when your is ON the credit card, that eliminates all the guess work. Hope this helps. Signatures just help theives. Picture ID’s hurt them. Richard


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