5 Misconception about credit card scores

Managing your credit can seem a little tricky at times. There are a few obvious ways to keep your credit score high, such as by keeping a low balance and paying off your monthly bills on time. Unfortunately, there is a lot of misinformation about managing your credit thats floating around out there. This leads to misconceptions that can actually harm your credit score. The following are five common misconceptions that you should avoid in order to maintain a high credit score.

1. If you are careful about your credit, then youll have good credit If you keep a low balance and you pay off all your bills in time, then this means that your credit score is excellent, right? This might be true, but it might also not be true. You should always check your credit report on a regular basis. You may be doing everything right in order to maintain a high credit score, but that doesnt mean that theres nothing wrong. There are often errors recorded on peoples credit ratings that affect their scores negatively. You need to make sure there are no errors on your credit score. If you spot any mistakes, you should dispute them in order to have them removed.

2. Once you check your credit report for errors, youll be fine Dont just check one credit report. Everyone has three different credit reports available from Experian, Equifax and TransUnion. Just because one report is error-free doesnt mean the others are. Check all three reports.

3. When you have the money, pay off old debts This could actually be a big mistake. Once a debt is older than the statute of limitations of your state, a debt collector can no longer sue you for non-payment of your debt. Unfortunately, if you begin making payments on a debt thats older than your states statute of limitations, youll end up reactivating that time period. This means that the creditor has another chance to sue you. Debts older than seven years tend to no longer show up on your credit report.

4. Credit cards that you dont need and that are paid off should be closed You should never close a credit card account if you have paid it off. First of all, by closing your credit card, you are removing any positive credit history associated with that card from your credit report. Secondly, youll be increasing your debt utilization ratio due to the fact that youre decreasing the amount of credit you have, thereby increasing the percentage of your balance versus your credit.

5. Keep a balance in order to increase your credit score Using your credit card is a great way to increase your credit score. However, maintaining a balance will do nothing but increase your interest payments. Having debt hurts your score, paying it off helps. So paying off your balance every month is the best way to increase your credit score.

Avoid these five misconceptions about credit scores in order to maintain a high credit rating.

Sam Jones, the author, has been investigating credit cards for bad credit on uSwitch to find the best possible deals.

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