Even though most of us know how to properly use credit cards by now, these are Top 5 most common credit card “myths” I’ve heard and whether or not there’s any truth to them - enjoy! Add me on Instagram: GPStephan
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FIRST MYTH: Leaving a balance on your credit card helps improve your credit score.
Well, the reality is that, NO, carrying a credit card balance does NOT increase your credit score…it only costs you money because now you pay interest on your unpaid balance. And paying more interest on a credit card DOES NOT increase your score any further than if you paid it off entirely, in full.
Instead, here’s what REALLY helps your credit score…and it’s important to understand this, because I’ll be referring to this later in the video:
35% of your credit score consists of your PAYMENT HISTORY: This means you pay your credit by the time it’s due, without any late payments. And when it comes to this, paying off your bill IN FULL or just making the minimum payment and leaving a balance will affect your score THE EXACT SAME in this category, as long as you just pay on time.
30% of your score is calculated by your credit utilization: this is amount you have available to use, versus how much you actually use.
15% of your score is calculated by the length of your credit history…the longer you have credit, the more robust your score will be.
10% of your credit score is calculated by “new credit” - generally the newer your credit lines, the lower your score will be, and this has a small impact.
10% of your score is calculated by the number and mix of credit lines of you have…it helps to have multiple credit cards, an auto loan, lease payments, mortgage payments, or a variety of different “types” of credit showing you’re responsible at paying all of those off on time.
SECOND MYTH: Too much credit makes it harder to get a house or car loan
Back in the 70’s and 80’s, the conventional thought among mortgage lenders was that if a borrower had access to too much available credit, they posed a higher risk of default because they’d have the ability and temptation to use all of it. However, in the late 1980’s, the FICO scoring method began analyzing their credit files…and that revealed that borrowers were NOT more likely to default on their payment if they had more credit available to them. And the “temptation” of having more credit would not “corrupt” an otherwise responsible borrower who paid on time. In fact, they found that the more available credit borrowers had, the safer they were, and the higher the credit score they should have!
THIRD MYTH: You should cancel cards you no longer use
Unfortunately, doing this could end up dramatically lowering your credit score and in most circumstances, this is a REALLY bad idea that you should avoid. If you have an old credit card you don’t use, just keep it that way…make sure to still keep it open, put it in a drawer, forget about it, put it in the frozen in a block of ice, give it to me so I can buy stuff with it…I really don’t care what you do. As long as you don’t close it.
FOURTH MYTH: Opening up a credit card will lower your score.
The answer to this is one…is YES. Opening up a credit card WILL have a negative impact on your score…but this isn’t as bad as people generally make it out to be. From my experience, overall, opening up a new credit card has such a minimal effect on your credit score…and in some cases, I’ve opened up new credit cards and seen my score actually INCREASE. So when it comes to this, I don’t really worry about it. If it does impact your score, it’s minimal…and long term, there are usually more benefits adding different lines of credit to your account.
FIFTH MYTH: You should use old credit cards to prevent them from being cancelled
And this myth is true. Credit Card companies only have the ability to extend a limited amount of credit to people, and they only make money when people use those cards…so when they extend credit out to someone who just NEVER uses their account, they’ll often cancel those cards so they can extend that credit line to someone else who will actually use it and make them money.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
Merch: http://www.GrahamStephanStore.com/
GET $50 OFF FOR A LIMITED TIME WITH COUPON CODE: THANKYOU50
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $125 million in sales: https://goo.gl/UFpi4c
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
FIRST MYTH: Leaving a balance on your credit card helps improve your credit score.
Well, the reality is that, NO, carrying a credit card balance does NOT increase your credit score…it only costs you money because now you pay interest on your unpaid balance. And paying more interest on a credit card DOES NOT increase your score any further than if you paid it off entirely, in full.
Instead, here’s what REALLY helps your credit score…and it’s important to understand this, because I’ll be referring to this later in the video:
35% of your credit score consists of your PAYMENT HISTORY: This means you pay your credit by the time it’s due, without any late payments. And when it comes to this, paying off your bill IN FULL or just making the minimum payment and leaving a balance will affect your score THE EXACT SAME in this category, as long as you just pay on time.
30% of your score is calculated by your credit utilization: this is amount you have available to use, versus how much you actually use.
15% of your score is calculated by the length of your credit history…the longer you have credit, the more robust your score will be.
10% of your credit score is calculated by “new credit” - generally the newer your credit lines, the lower your score will be, and this has a small impact.
10% of your score is calculated by the number and mix of credit lines of you have…it helps to have multiple credit cards, an auto loan, lease payments, mortgage payments, or a variety of different “types” of credit showing you’re responsible at paying all of those off on time.
SECOND MYTH: Too much credit makes it harder to get a house or car loan
Back in the 70’s and 80’s, the conventional thought among mortgage lenders was that if a borrower had access to too much available credit, they posed a higher risk of default because they’d have the ability and temptation to use all of it. However, in the late 1980’s, the FICO scoring method began analyzing their credit files…and that revealed that borrowers were NOT more likely to default on their payment if they had more credit available to them. And the “temptation” of having more credit would not “corrupt” an otherwise responsible borrower who paid on time. In fact, they found that the more available credit borrowers had, the safer they were, and the higher the credit score they should have!
THIRD MYTH: You should cancel cards you no longer use
Unfortunately, doing this could end up dramatically lowering your credit score and in most circumstances, this is a REALLY bad idea that you should avoid. If you have an old credit card you don’t use, just keep it that way…make sure to still keep it open, put it in a drawer, forget about it, put it in the frozen in a block of ice, give it to me so I can buy stuff with it…I really don’t care what you do. As long as you don’t close it.
FOURTH MYTH: Opening up a credit card will lower your score.
The answer to this is one…is YES. Opening up a credit card WILL have a negative impact on your score…but this isn’t as bad as people generally make it out to be. From my experience, overall, opening up a new credit card has such a minimal effect on your credit score…and in some cases, I’ve opened up new credit cards and seen my score actually INCREASE. So when it comes to this, I don’t really worry about it. If it does impact your score, it’s minimal…and long term, there are usually more benefits adding different lines of credit to your account.
FIFTH MYTH: You should use old credit cards to prevent them from being cancelled
And this myth is true. Credit Card companies only have the ability to extend a limited amount of credit to people, and they only make money when people use those cards…so when they extend credit out to someone who just NEVER uses their account, they’ll often cancel those cards so they can extend that credit line to someone else who will actually use it and make them money.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
So why did my credit score go down because it’s shows zero balance. The stupid credit company are penalizing me for not using my credit card. But the thing is I do use my cards. I just pay it off before the next statement.
So about credit card utilization: are you trying to stay under 10% on the total of all your credit cards, or are you supposed to stay under 10% on each of the credit cards? So if I want to get bonus miles on one credit card that has a limit of 6k, will I lower my credit score if I pay the 4k requirement due to the 6k limit? Or will it not matter as long as 4k is under 10% under my TOTAL credit limit? Of course this is assuming I pay off the balance on full before the due date.
Regarding the first one, that system ACTUALY makes sense as a way to gauge if a person is a going to be able to pay off a major lone. This shows you can make payments on time with interest included. The way the system actually works (just pretend it's a debit card and pay in full before a bill even hits your mailbox) proves nothing of someone's ability to pay off debt, they have never even been in debt.
Don't you have to pay annual fees on credit cards even if you don't use them?
REMAKE THIS VIDEO JUST FOR THE NEW SUBS IN OCTOBER 2021
Can you review the Chime Credit Builder Card
I broke my monitor by smashing it. Thanks.
I work as a sales person at a retail store and talk about a variety of stuff. One of the most common things is boomers trying to give me “financial advice” where they tell me to cancel my cards and not have high limits….
comment
Old video I know but someone here may be able to help…
Is it better to pay at the end of the month or after each transaction or does it not make a difference?
Paying off the complete balance lower the credit usage which brings it down to zero and can cause you to lose points based upon your length of credit history
Thanks for telling us all of this so we don’t make the same mistakes
I kinda wanna take him up on the “give it to me so I can spend money on it” I feel like that would be the smartest investment I’ve made yet
I like you a lot Graham, and I hear you and respect you. BUT THIS TIME you are wrong my friend. Let me tell you why. If like me you have two cards with an annual fee (each 1K limit) and five with much higher limits (5K), the credit history stays with you for up to ten years anyway, saving the annual fee. Especially if the two cards you are closing only have a 1K limit plus the annual fee. Closing cards with an annual fee and low credit limit makes sense even if they are two of the older ones. On everything else you say I AGREE WITH YOU. You're a lot of fun and have a nice personality.
He keeps saying inquiries only stay on your report for six months, but Credit Karma and my Experian app say two years.
Which movie is that around 4.30 s ?
So, I have a question. I have three credit cards, and I always pay them in full before the due date. I asked for a credit line increase on one of them, and I was rejected for not having revolving credit. So it makes me think that if I pay before the due date, they cc companies will always be reporting "zero debt" and then like I'm not showing I can be trusted with taking on any debt? I don't know. Can you shed some insight on this, or point me to a video you've on this? Thanks.
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I got laughed at when I started forex trading. I was burnt out, needed a change, also wasn't expecting to be laughed out of the office when I mentioned my interest in investing in the stock market. Well, a few years later and $5.3 million in savings, I'm the one laughing now. Friends now want to know exactly what my i do to earn well I advise everyone to start trading in the stock market today for a better tomorrow that’s all I can say,thanks to Mr carlos @carlos_1uptrades on instagråm. I’m making a living trading forex
I really loved and enjoyed the generosity, 100% responsive and 100% credit repair service Mrs Debbie offered me at Credit Patch-UP LLC. Hit them up for credit repair service (removal of negative items and score increase across all bureaus).They're a good recommendation because they fixed mine too which is amazing, my reports is now freed from 19 negative items and few derogatory marks and score move up by 262pts. ✉✉ (Debbie@creditpatchup.com)
I have three credit cards and I had a secured credit card with TD Bank and I closed it and my score went up 15 points.
👌🏼keep em coming i need to get my credit back up lol
I never knew this is gonna workout until I work with him Leopinhack on telegram he is the best
We need an updated video with more info 🙂
Credit score worth nothing. You can have 750+ Fico and get rejected a secured CC.
There is so much confusion on credit utilization if I have a 1000 credit line but I use 300 but pay it off before the next billing cycle does this mean I have a 0% utilization rate ? Or will it be 30% ? Or if I carry over the 300 for the next month will that be 30%?