This article is sponsored by Creditrepair.com.
If you were a tween growing up in the 2000s, chances are you read the Confessions of a Shopaholic series (and watched the 2009 film adaptation out of internalized obligation and curiosity). The books follow Rebecca Bloomwood, a journalist who is terrible with money because she cannot, for the life of her, control her cartoonish impulse to buy all things designer. One day, after her credit cards get dramatically declined at a designer store, she does some digging and realizes she’s in tens of thousands of dollars in debt. This propels her to get a job at a finance magazine (what could go wrong?) in order to pay off a stressful pile of bills. Looking back on it, Confessions of Shopaholic was a cute YA series, but it was also reductive (why is it that female journalists are always awful with money?! Lookin’ at you too, Carrie Bradshaw), and it taught me to fear (and misunderstand) credit cards.
As a 30-year-old who’s done her research, gotten better about spending money, and runs her household’s finances, I treat credit cards like a great resource versus an illusion that I can spend however much I want, whenever I want. But in my late teens and early twenties, I used credit cards all wrong — because I didn’t know what I was doing.
Movies like Confessions of Shopaholic teach us that we should treat our credit cards like magic pieces of plastic that hold endless amounts of money. Sure, we’ve learned not to go overboard and purchase 20 pairs of Prada heels, but there’s so much more to credit cards than simply borrowing money and paying it back. Credit cards aren’t the “alternative” to debit cards, and should be handled carefully and smartly. Before I learned how to optimize my credit cards to their fullest potential, I was held back by a bunch of myths I learned from movies, and in real life from family and friends.
1. Too many credit cards will doom your credit score forever.
Once I figured out having store credit cards could potentially save me a bunch of money through rewards programs, I applied for Gap, J. Crew, Target, Amazon, and Loft cards (not all at once — and I’ll get to that in a second). I also had a credit card through my bank, and a Discover card because they offered 0% APR for the first six months. I was immediately told by someone close to me that it wasn’t a good idea to have so many active credit cards, and that my “collection” could damage my credit score.
This is mostly a myth, but there is a bit of truth to that. The amount of credit cards you have doesn’t affect your credit score, but whenever you do apply for a card, the application process means someone is looking into your credit file, and that inquiry slightly decreases your score. If you open up a bunch of new credit cards all at once, sure, it could negatively impact your credit score. Additionally, your score is based on a lot of things, including your account history — if you have a slew of cards that have only been active for a short period of time, that could also affect your score.
However! I didn’t go on a credit card applying spree. I spaced each application out, and also made sure to pay off each one every month, especially if they were store credit cards (they tend to have higher APRs).
Pro tip: If you’re still unsure of what exactly affects your credit score, CreditRepair.com helps you stay on top of your credit score, and it’s super easy to use, especially if you’d rather be a bit more hands-off with your finances.
2. Checking your credit card score will lower it.
When I first started building credit, I was terrified to check my score more than once a year. Somewhere out there, I learned that once a year was the limit, and checking my own credit score would hurt it. Luckily, that’s not true. According to NerdWallet, when you check your own score, that’s considered a “soft pull,” which doesn’t impact the score. When you apply for a new card, have a landlord check your credit before you’re approved for a new rental, or need a loan officer to do a more intense inquiry into your credit before you’re pre-approved to buy a home, that’s called a “hard pull,” and a hard pull will temporarily bump down your credit score.
Pro-tip: You can use a tool like CreditRepair.com to easily keep a watchful eye on your credit card score as well as learn helpful ways to grow your credit. After a hard pull, Creditrepair.com will show you how your score has been affected.
3. You need to carry a balance in order to achieve good credit.
I actually believed this one up until a couple years ago. While I made sure to pay off store credit cards with astronomical APRs (what’s the use of rewards points when you’re just paying crazy interest rates?), I didn’t mind that my Discover card had a balance on it. Especially since my Discover card was my go-to for vacations, I leisurely paid that one off. It seemed to sting less that way, even though I ended up paying more for my vacation. I also thought the balance would help me build my credit score.
During the process of buying a house, I learned that this wasn’t true. In fact, a balance that doesn’t get paid off quickly can affect your credit card utilization rate, according to CNBC. You want your card card utilization rate to be as low as possible. We ran into some issues when our loan officer notified me that my husband had…*drumroll* $20,000 in debt and that was impacting his credit score — even though he paid his credit card bills incrementally each month. We immediately paid off as much as we could, using our savings account (but also not using up everything we had, since we still had to worry about a down payment), but the damage was done — credit scores don’t drastically bounce back overnight.
While keeping a big balance isn’t advisable (although sometimes, in tough situations, you might have to), using some of your credit cards regularly and paying them off every month is how you build good credit.
4. It’s best practice to cancel any cards you’re not using.
At first, I thought that once you’re done with a credit card, you can simply cancel it and cut it up with scissors like you’re in a movie. But actually, you don’t need to do this. According to Motley Fool, when you cancel your credit card, you actually lose a line of credit, so you’ll have overall less available credit. And this, in turn, can cause your credit utilization to go up, which does negatively impact your credit score.
So, it’s best to keep credit cards around, even if you rarely use them. Plus, you never know when you might need them in a pinch.
5. Missing your payment by a few days will lower your credit score.
The first time I accidentally missed a payment, I agonized over it for weeks. Even though I missed the deadline by a couple of days, I stressed that this oversight would cost me valuable points and would take months (years?!) to recover. Luckily, credit card companies aren’t totally evil. They don’t see your 1-2-day late payment and think to themselves, “Bwahahaha, we’re lowering this slacker’s credit score.” Motley Fool reports your score is only damaged if you miss a payment by at least 29 days.
So, sure, if you completely forget about a payment and are sent a notice about it a month later — you just got busted. And your credit score most likely did get dinged.
Here’s how it works: Your bank will report your payments to the credit reporting agencies with specific codes. The codes align with accounts paid on time and those that are 29 days (or more) past due. So, if you realized you missed your payment, pay it a couple days (even a week!) later, you’re all good — that communication between bank and credit agencies most likely hasn’t been activated yet.
Pro tip: Another option is using CreditRepair.com’s services to stay on top of your credit score so that you’re always in the know — and knowledge is power.
6. The amount of money you make impacts your credit score.
When I was younger and making not-so-much money, I worried that I was setting up a terrible foundation for my slowly growing credit card score. I figured the richer you were, the higher your credit score would be, automatically — but that is very much not the case.
First off, your salary and your credit have no correlation whatsoever. You could be a billionaire and have terrible credit. You could be making $12,000 a year and have impeccable credit. The only reason why you’re asked about your salary when you apply for a card is to evaluate what line of credit is appropriate for you. The 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD) is a law put in place to actually stop manipulative credit card company practices that offered a larger line of credit for folks who probably weren’t ready to take on that big of a number. Because of CARD, credit issuers need to know if you make enough money to cover your line of credit. “Different card issuers have different standards for creditworthiness. They use your income to determine things such as the amounts of your initial credit limit and subsequent increases,” credit industry analyst Nathan Grant tells Lending Tree.
However, your income cannot affect your credit score. “Income isn’t even on your credit reports, so it can’t impact your score. Wealth metrics aren’t considered by credit scoring models,” says financial expert John Ulzheimer, who worked at FICO and Equifax, per CNBC.
7. Getting married impacts your credit score.
I always thought when you get hitched, your S.O.’s debts somehow impact your credit score. Which luckily isn’t the case, because as I said before, my husband had way more debt than I did. When you get married, your credit score will never, ever merge or touch your spouse’s, according to Credit.com. Another similar myth is that if your spouse passes away, you’ll be left with their loans that need to be paid off. Per the Consumer Financial Protection Bureau, nobody is obligated to pay the debts of a deceased person. There are exceptions to that rule, like if you co-signed a lease or mortgage with that person, or if you have a joint credit card. Basically, anything that tied your investments with their investments will make it so you’re held responsible if anything were to happen. But if your S.O. had somehow managed to accumulate hundreds of thousands of debt on their own cards, you won’t be responsible for that.
8. Last one, just for fun: If you freeze your credit card into a giant ice cube in your freezer, you’ll be deterred from spending money.
Like I said, Confessions of a Shopaholic was super formative for me, money-wise! I mean, sure, if you keep one of your last, untouched credit cards out of reach, it might be more annoying for you to use it. But…you could always order a new card.
You could always use a tool like CreditRepair.com to help you repair, build, and maintain your credit score by working directly with the credit bureaus — especially if you think your score should be higher than it is — CreditRepair.com works with you to help you understand your score and how the rating system really works.
Thanks to CreditRepair.com for sponsoring this article.
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