Advertiser disclosure You’re our first priority. Each time. We believe everyone should be able to make financial decisions with confidence. Although our site doesn’t feature every company or financial product available in the marketplace, we’re proud of the advice we provide, the information we provide and the tools we develop are objective, independent easy to use and free. So how do we earn money? Our partners pay us. This could influence the types of products we write about (and where those products appear on the website), but it in no way affects our recommendations or advice that are based on thousands of hours of research. Our partners are not able to pay us to guarantee favorable review of their services or products. .

3 Common Credit Myths That Could Damage Your Score

A NerdWallet survey finds that Americans have misconceptions about credit that can affect the credit score of their loved ones.

Written by Erin El Issa Senior Writer | Personal finance, analysis of data, credit cards Erin El Issa writes data-driven research on personal financial matters, credit cards, investment, travel, banking as well as student loans. She is fascinated by numbers and strives to make data sets understandable to help people improve their financial lives. Before she became an Nerd in 2014, she was an accountant for tax and freelance personal finance writer. Erin’s writing has been featured as a result by The New York Times, CNBC as well as on the “Today” programme, Forbes and elsewhere. In her free moment, Erin reads voraciously and is unable to keep up with her two children. Erin is from Ypsilanti, Michigan.

October 4 Oct 4

Edited by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, debt and money management Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years with The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Her previous experience includes editing copy and news for various Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor’s in journalism and mass communications from the University of Iowa.

A majority of the products featured here are from our partners who pay us. This impacts the types of products we review and where and how the product is featured on a page. However, this does not affect our opinions. Our opinions are entirely our own. Here is a list of and .

Financial misinformation is rampant, and it could be affecting your score on credit. finds that Americans are prone to misconceptions regarding their credit scores, many of which could seriously damage their scores. Three common credit score myths, and the best way to avoid them.

Myth 1. Leaving a balance on your credit card is beneficial for your score

This is a recurring credit myth nearly half of Americans (46%) believe that putting the balance on their credit card is more beneficial for their credit scores than paying the balance off in full, according to the survey. The truth is that carrying a balance does not aid your credit score and may, in fact, be harmful if the balance is a large percentage of the credit limit you have available. That’s because it increases the amount of credit you use (the amount of your credit limit in use) which can significantly impact your credit score.

Another disadvantage of having an unpaid balance on your credit card comes from the cost of interest. Credit card debt — that you are liable for when you have the card in a state of balance, even if intentionally -is among the most costly types of debt due to two-digit interest rates. Although you might believe that leaving a modest balance on your card wouldn’t be expensive, it could be due to .

If you don’t pay off the entire balance by deadline, the interest is calculated, but not only on the balance that remains. In fact, interest is calculated according to the average daily balance on your card. For instance, if you have a $10 balance in your account however, the average daily amount on your credit card for the period of time was $1,000, interest is added to the balance of $1,000.

You can stop this from happening by paying off the balance before or on the due date. This could reduce the amount of credit you use and your the monthly cost.

Myth 2. Closing a credit card you don’t need is beneficial for your credit

The study found that nearly fifty percent of Americans (46 percent) think closing a credit card that they do not use will help their credit score. Maintaining a financial product that you aren’t using seems counterintuitive however closing a credit card can damage your score.

Closing a credit card can hurt your credit score due to the credit utilization. And while there are some reasons, generally speaking, disuse isn’t enough of a reason to take the credit hit.

If you don’t end up cancelling your credit card, the issuer will eventually shut down accounts that aren’t used over a certain period. To combat this, you can charge an occasional fee -for example, an annual subscription to your card and create autopay to wipe off the balance of your credit card every month.

Myth 3. A credit report won’t affect your score

A majority of Americans (28%) don’t realize that a lender running credit checks can make their credit score go down, according to the study. There are two kinds of credit checks, a hard inquiry and a soft inquiry. When you check your credit it’s a gentle inquiry that doesn’t impact your score. But when a lender checks your score to determine your creditworthiness for a loan this is a , and your score can go down.

There are some exceptions. For instance, with specific financial services, like a mortgage or auto loan, several inquiries made within a brief time period are considered to be one hard inquiry. The time frame for processing varies by credit scoring model, but it is recommended to make all requests within two weeks. This is referred to as “rate shopping” and permits you to search for the most favorable loan terms.

However it is true that applying for multiple credit cards in a short period isn’t considered rate shopping, and can result in a hard inquiry for each application. This is why restricting the number of applications you submit is a good idea. Hard inquiries could remain in your credit file for a period of two years. So, prior to applying for another credit card, be sure you’re within your credit score range.

Author bio Erin El Issa is an expert in credit cards and a writer for studies at NerdWallet. The work she has written for NerdWallet was featured on USA Today, U.S. News and MarketWatch.

Similar to…

Dive even deeper in Credit Score

Do all the right financial moves

If you liked this article and you would like to obtain more information pertaining to payday loans las vegas no credit check online kindly visit our web site.