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5 Common Credit Building Myths

Although information about credit building is readily available, there’s still a great deal of mystery surrounding certain topics like debt management and credit cards. Public Service Credit Union is here to shed some light on those myths! If you’ve been working hard at improving your score and have seen little progress, buying into any of the following un-truths could be the reason. Read on to learn more about common credit building myths and why it’s important not to regard them as facts.


1. All Debts Are Created Equal

If your credit lines are maxed out to the point where you owe $150,000, that’s a problem and a debt that needs to be addressed — quickly. However, if you have a mortgage loan of $150,000 that you’re paying on monthly, your situation is no different than tens of thousands of other homeowners in the United States. Some debts require immediate attention and others are par for the course, depending on how they were incurred.


2. There is Only One Credit Score Formula

A credit score is a numerical representation of your creditworthiness. However, what you may not know is that you could have dozens or even hundreds of credit scores, based on over a thousand scoring models. When you apply for a loan or a credit card, the lender will look at your credit score through the lens of a multitude of formulas — each checking a different aspect of your score.


3. You Should Carry a Balance on Your Credit Cards

This is one of the most damaging (and costly) myths on this list. Carrying a balance on your credit cards will cause interest to accrue. With the average interest rate for new offers at around 20%, that $50 pair of new shoes can become $60 — not taking into account the other charges that may be on your account. It’s best to pay your balance off in full, and avoid rolling a balance over into the next month.


4. Credit Cards Should Be Avoided at All Costs

Credit cards aren’t inherently bad, it’s just that not everyone knows how to use them. If used wisely, credit cards help improve your credit score by establishing an account history, credit utilization ratio, and a payment history. If you’re a responsible person who budgets carefully and pays your bills on time, chances are you can handle a credit card and the responsibilities that come with it.


5. You Should Never Accept a Credit Limit Increase Offer

There are instances where it’s possible to have a credit limit that’s too high, especially if you tend to overspend, but accepting an offer to increase your credit limit can help you. Raising your credit limit will lower your credit utilization ratio by increasing the amount of credit you have available. This can boost your credit score and give you additional credit to utilize in an emergency.


Learn How to Build Your Credit with Public Service Credit Union

Do you have more questions about credit building, or how you can get a credit card through a credit union? Public Service Credit Union is here to help! Contact us to find a credit union near Romulus and Detroit, and to get more tips on how to use a credit card the smart way, whether you’re a veteran or first-time cardholder.


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