Ever try splitting a dinner check with your friends? You know what I mean. When it comes time for everyone to put in their credit cards, everybody has some credit card wisdom to share.
This is because most of our friends adhere to something that I call conventional credit card wisdom, which is a misguided set of information that explains and surrounds credit and credit scores. It is generally bad advice that is the result of applying logic and reason to a less than logical system.
The misinformation spreads like pollen.
Because conventional credit card wisdom seems to make sense.
It’s no different than conventional weight loss advice. Ask most people how to lose belly fat and they’ll have you on the ground doing 60 sit ups in 60 seconds. After all, doing a stomach workout will target your stomach fat, right? Not entirely.
It’s not that your friends are trying to intentionally deceive you. They are simply reiterating the same bad advice that was given to them. With so much of it out there it can be difficult to avoid. Even I fell victim to believing most of the credit card myths too.
- “Credit cards are dangerous. You should always pay cash and live debt free.”
- “Paying your full bill every month will prevent you from building credit history. You need to carry a balance from month to month if you want to improve your score.”
- “I have never had a credit card or loan so I have an excellent credit score.”
- “You should close a credit card immediately after paying it off. That will remove it from your credit report and improve your score.”
Seems logical, right?
So if I told you that every single one of those statements was false, would you believe me?
Probably not. Which is exactly why conventional credit card wisdom seems to live eternally.
But it’s the truth. Following any one of those tips would be a bad move from a credit score standpoint. We will talk about these and other famous credit myths in a future blog posts.
So for now, let’s focus on one major point.
Credit scoring is not intuitive.
Actually, it is often times quite strange. Its difficult but don’t get caught up in trying to rationalize it. Most importantly, don’t let anyone else try to rationalize it for you. Instead, take the time to learn how your credit score works.
For a brief blog post of how credit score works, click here.
WARNING: it can help you earn tons of cheap/free travel.