Credit cards are more than just pieces of plastic—they’re gateways to financial flexibility. But with great power comes great responsibility, and unfortunately, a lot of misinformation. Many people believe myths about credit cards that can lead to poor financial decisions. Let’s set the record straight and uncover the truth behind these common misconceptions.
It’s easy to assume that a high salary means a high credit score. But the truth is, your income has no direct impact on your credit score. What matters is how you manage your finances—paying bills on time, keeping debt low, and using credit responsibly.
Some people think having multiple credit cards will tank their credit score. The reality? Owning several cards isn’t a problem if you manage them well. The issue arises when you apply for too many cards in a short time, leading to multiple hard inquiries that can temporarily lower your score.
Many believe that shutting down old credit card accounts will boost their credit score. In fact, closing these accounts can reduce your total available credit, which increases your credit utilisation ratio. A higher ratio can negatively impact your score. Keeping old accounts open helps maintain a longer credit history, which is good for your score.
One of the most persistent myths is that checking your credit score will hurt it. The truth is, when you check your own score, it’s considered a soft inquiry and doesn’t affect your credit. Only hard inquiries, like those made by lenders when you apply for credit, can have a small, temporary impact.
Some people think having no credit history is a good thing. In reality, no credit history means you don’t have a credit score, which can make it harder to qualify for loans or credit cards. Building credit is essential for financial opportunities.
Another common myth is that closing old credit card accounts will improve your credit history. In fact, keeping these accounts open helps maintain a longer credit history, which is a key factor in calculating your score. Closing old accounts may reduce your credit history length and lower your score.
No, having multiple cards won’t hurt your score if you manage them responsibly. However, applying for too many cards at once can lead to multiple hard inquiries, which may lower your score.
2. Will closing old credit card accounts improve my score?
No, closing old accounts can actually hurt your score by reducing your credit limit and increasing your credit utilisation ratio.
3. Does checking my own credit score lower it?
No, checking your own score is a soft inquiry and doesn’t affect your credit score.
4. Is no credit history the same as good credit?
No, having no credit history means you don’t have a credit score at all. Building credit is essential for future financial opportunities.
5. Does a high income guarantee a high credit score?
No, your income does not directly affect your credit score. Timely payments and responsible credit management are what matter.
6. How can I build credit if I have no credit history?
Start with a secured credit card, a small loan, or an overdraft on a fixed deposit to establish a credit history.
Take charge of your credit today, and pave the way for a brighter financial future!
Myth 1: A Big Paycheck Equals a Great Credit Score
Truth: Your income doesn’t determine your credit score—your habits do.It’s easy to assume that a high salary means a high credit score. But the truth is, your income has no direct impact on your credit score. What matters is how you manage your finances—paying bills on time, keeping debt low, and using credit responsibly.
Myth 2: Too Many Credit Cards Will Ruin Your Score
Truth: It’s not about how many cards you have, but how you use them.Some people think having multiple credit cards will tank their credit score. The reality? Owning several cards isn’t a problem if you manage them well. The issue arises when you apply for too many cards in a short time, leading to multiple hard inquiries that can temporarily lower your score.
Myth 3: Closing Old Credit Cards Helps Your Score
Truth: Closing old accounts can actually hurt your score.Many believe that shutting down old credit card accounts will boost their credit score. In fact, closing these accounts can reduce your total available credit, which increases your credit utilisation ratio. A higher ratio can negatively impact your score. Keeping old accounts open helps maintain a longer credit history, which is good for your score.
Myth 4: Checking Your Credit Score Will Lower It
Truth: Checking your own score has no impact—it’s a soft inquiry.One of the most persistent myths is that checking your credit score will hurt it. The truth is, when you check your own score, it’s considered a soft inquiry and doesn’t affect your credit. Only hard inquiries, like those made by lenders when you apply for credit, can have a small, temporary impact.
Myth 5: No Credit History Is Better Than Bad Credit
Truth: No credit history means no credit score at all.Some people think having no credit history is a good thing. In reality, no credit history means you don’t have a credit score, which can make it harder to qualify for loans or credit cards. Building credit is essential for financial opportunities.
Myth 6: Closing Old Cards Improves Your Credit History
Truth: Keeping old accounts open strengthens your credit history.Another common myth is that closing old credit card accounts will improve your credit history. In fact, keeping these accounts open helps maintain a longer credit history, which is a key factor in calculating your score. Closing old accounts may reduce your credit history length and lower your score.
FAQs About Credit Cards and Credit Scores
1. Does having multiple credit cards hurt my credit score?No, having multiple cards won’t hurt your score if you manage them responsibly. However, applying for too many cards at once can lead to multiple hard inquiries, which may lower your score.
2. Will closing old credit card accounts improve my score?
No, closing old accounts can actually hurt your score by reducing your credit limit and increasing your credit utilisation ratio.
3. Does checking my own credit score lower it?
No, checking your own score is a soft inquiry and doesn’t affect your credit score.
4. Is no credit history the same as good credit?
No, having no credit history means you don’t have a credit score at all. Building credit is essential for future financial opportunities.
5. Does a high income guarantee a high credit score?
No, your income does not directly affect your credit score. Timely payments and responsible credit management are what matter.
6. How can I build credit if I have no credit history?
Start with a secured credit card, a small loan, or an overdraft on a fixed deposit to establish a credit history.
Conclusion
Credit card myths can lead to confusion and poor financial decisions. By understanding the truth behind these misconceptions, you can take control of your credit health. Remember, your credit score is shaped by your financial habits—not your income or the number of cards you own.Take charge of your credit today, and pave the way for a brighter financial future!