Misconceptions about Credit Cards

[MortgageQueen]

Now I am a little more confused with the different answers I have received. I'm not sure if this makes any difference with my post #2, I forgot to state that I only have a secured MC that I had to pay into in order to get after claiming bankruptcy 5 yrs ago. I've had this card for 3 yrs now. Its the ONLY debt I have, thankfully. I am nowhere near my credit limit as I set myself a credit max I can financially handle. The main reason why I increased my limit even though I never intended to get anywhere near it, was based on what the woman at the company told me. I know that my score is fairly good and I would hate for it to be lowered just b/c I followed the wrong advice.
Maybe a call back to the credit card company might clear up a few things for me as well.

Naianai, you should actually apply for a non-secured card to establish more credit behavior, rather then just increase a secured card.
Potential Lenders like to see a minimum of 3 "trades" or sources of credit. It can ba a bank loan, a lease, or a credit card(s). It doesn't matter. It just helps them to see your overall behavior/responsibility in making timely payments.

[i_forget]

When I think of credit, I think of it like something that tastes really good.....too much of a good thing is BAD. You need to have a reasonable mix.
If you have too much available credit, it is a bad thing. They look at it like you can go out and go crazy and max yourself out and then how will you pay your bills? It is there for you to potentially spend!
If you do not have enough credit, it is bad, because why are lenders not extending you credit or why are you not requesting it? Do you not make enough money to have credit? Did you go bankrupt?
If you are out opening up accounts and closing accounts all the time, why? Because you live on credit and cannot pay for things with cash so you need 20 different store cards?
Why are you carrying a balance?

I believe that most lenders want to see long term credit histories with healthy amounts of borrowing and good repayment. This gives them a positive sense of what type of customer that you are.

[y2ktrent]

Ummmmm. . ..would you like to expand on why you feel this way? . . Because I read and advise people on their credit bureaus everyday. . . and I'm quite sure it does indeed affect their score.

Having too much available credit does not impact your credit score negatively, it actually can help by keeping your credit utilization low however a lender may look at someone with too much available credit as a credit risk.

Here are some links on factors that affect credit score.
http://www.myfico.com/crediteducatio...yourscore.aspx
http://www.transunion.ca/ca/personal...ge#calculation
https://help-en.equifax.ca/app/answers/detail/a_id/379/noIntercept/

[chillys-willy]

I just took out a cash advance under a special 2% rate with my credit card. When I read the fine print, there was a 1% service fee. Still no biggie. I tried to ask alot of questions to find out the "catch" but could not come up with what it was when I agreed to the money. I needed it fast anyway so needed to go this route. Well, a month later, I have paid off enough to cover my purchases plus some of the cash advance. I thought I would only be charged the 2% for the cash advance. No. They only put a large "portion" of your payments towards the purchases and the rest towards the cash advance. No one I phoned at MBNA wanted to tell me what that percentage was. Well, I figured there would be a catch and was able to pay it all off this month with a line of credit. Lesson learned. I knew it looked to good to be true.

[MortgageQueen]

Thanks for sharing that Chillys-willy. It's no fun being deceived. . . but at least it wasn't something huge. Hopefully others who read this will be much more wary. . .thanks to YOU!

[GoStumpy]

Far too many use credit cards improperly.... and even more think paying interest on their line of credit is 'normal'.... I think the biggest misconception is that carrying a balance on credit cards is 'normal'!

Being on a money-saving site we definitely see one side of the argument far more than the other!

[Baggravation]

I just got my very first credit card because I was told by numerous people that I need to build my credit score. I was thinking that I would just use my credit card to pay my cellphone bill every month which is around $30. I think that's a good place to start. Could someone let me know some ways that I can build my credit score? I never thought about this much but a lot of people have been telling me it's very important.

[GoStumpy]

As long as you do nothing to HURT your credit score, I wouldn't worry very much about it.. seems to have a way of building itself over time

Make sure you pay every single bill BEFORE it's due, and that's about all you should be doing to build credit...

[blueeyetea]

I was thinking that I would just use my credit card to pay my cellphone bill every month which is around $30. I think that's a good place to start. Could someone let me know some ways that I can build my credit score?

Because you have monthly bills and you're paying them, you're already building your credit score. Next step would be renting an apartment, I think.

[MortgageMaster]

I just got my very first credit card because I was told by numerous people that I need to build my credit score. I was thinking that I would just use my credit card to pay my cellphone bill every month which is around $30. I think that's a good place to start. Could someone let me know some ways that I can build my credit score? I never thought about this much but a lot of people have been telling me it's very important.

Some of the monthly bills that you pay ie rent, phone etc are not reported to the credit bureaus. To help your score get another credit card and use it and pay it off each month before the due date. Another option is to try to get a line of credit from your bank, personal loan or a car loan. These types of repayments show responsible use of credit. Sometimes people feel it is better to use cash only which is great. However when they apply for a mortgage and their credit report comes back with either not enough trade lines or no established credit the lender won't look at them. The same could be true if you applied for a car loan but had no established credit.

[GoStumpy]

^ Problem I see is, personal and car loans both charge interest, not chump change either. That is where I draw the line on 'building credit'... I don't want to PAY HUNDREDS to 'build credit'. I guess I'm just wierd wanting to be debt-FREE!

http://www.ecredable.com/ is a great alternative

[Brynhilde]

Ummmmm. . ..would you like to expand on why you feel this way? . . Because I read and advise people on their credit bureaus everyday. . . and I'm quite sure it does indeed affect their score.

I thought also as well that the outstanding debt is more what matters, not what you have available. I would assume available means unused. Perhaps you could further explain the difference and my apologies in advance if you explained it already but I haven't seen it on this page Thanks MQ

[GoStumpy]

Equifax is the most widely used credit score and totals can range from 300 to 900. The break-up is as follows:
35% of the total score is based on payment history

30% is the amount owed and the available credit
15% is for length of credit history
10% is for types of credit used
10% is for search and acquisition of new credit and inquiries

[wifey]

I have been guilty of applying for credit cards when offered a deal (for example 10% off my purchase). I now have an embarrassing collection of credit cards. None of them have a balance. They are all paid off (Thank my lucky stars). But now I would like to start cancelling them. I have been told that this will affect my credit score. Any thoughts or opinions on that??

[GoStumpy]

It will only affect your "available credit", which means it WILL lower your score, but not as a "black mark".