SPOKANE, Wash. – When it comes to credit card offerings, it seems like every department store, credit union, or restaurant has a deal.
But when it comes to finding the right card, or using it to build good credit, even though everyone has an opinion, credit card myths still circulate.
NonStop Local sat down with two local credit experts to separate the fact from fiction.
Combined, BECU Branch Manager Jacob Baker and STCU Vice President Robin Galtieri have decades of Credit Myth busting experience.
MYTH 1: Carrying a Credit Card Balance Builds your Credit Score
One common myth is that carrying a credit card balance from month to month builds your credit score.
“If you can, pay off your card each month,” Baker said. “It’s the best way to make sure and maintain your credit and build good credit.”
Galtieri agrees.
“Paying it off monthly absolutely will impact your credit score in the most positive way,” she said.
But emergencies do happen.
“Make sure you pay it off quickly,” Galtieri said. “That’s the key.”
And the experts agree, make sure those payments are on time.
“At a minimum, the most important thing is making sure your payment is on time,” Baker said.
Experts say those on time payments, are a big part of calculating credit score.
Galtieri and Baker also explained that to build good credit, you should prioritize spending no more than 30% of your total credit limit.
That means if you have a credit limit of $100, spend no more than $30.
MYTH 2: Closing Credit Cards is always bad
When it comes to credit cards, you might have heard the mantra: “Never close a card.”
While the experts say that closing a card can lead to a ding on your credit score, its important to weigh those balances against potential harm by irresponsibly using credit.
“You have to weigh that benefit to you,” Galtieri said. “At the end of the day, if that’s the answer, that’s the answer. And you take the short hit on your credit score for the long term gain of being able to get in a financially healthy spot. “
If you’re considering opening new cards, Baker and Galtieri recommend exercising caution.
“If you can, get back to having one or two cards potentially,” Baker said. “You can utilize one and have the other in case of an emergency.”
But before you cut up an old card, consider speaking with an expert at your financial institution.
“You can absolutely make decisions on your own,” Baker said. “If you’re confused or if [you’ve had] problems in the past on how to manage it, go talk to somebody.”
Of course, certain credit cards also have benefits. Baker and Galtieri said those benefits can be utilized to fit into your lifestyle and get more out of your card, but they recommend talking to an advisor to find the right fit.
MYTH 3: You can’t recover from a bad credit score
“It’s not as complicated as people make it up to be in their own head,” Galtieri said. “There’s a specific algorithm you can follow. There are certain behaviors and practices that you need to do in order to build really nice credit.”
Credit is run monthly. Experts say that by understanding how credit is calculated, you can make incremential steps to recovering your credit.
“Our goal is to find a solution no matter what your history might be,” Baker said.
And even though a low score might seem daunting, both experts made it clear: you can recover.
“It’s not a sentence, it’s something that you absolutely can recover from,” Galtieri said.
Myth 4: There is “Standard advice”
When it comes to managing credit, while people online frequently share universal tips, experts say each situation is different.
So to determine what works for you, speak with an advisor and get a personalized plan.
Baker and Galtieri both explained that is how you really maximize your cards.
