Have you ever noticed that when the topic of credit or credit scores comes up, everyone seems to have something to say?
Try splitting a dinner check with your friends and you’ll see what I mean. When it comes time for everyone to toss in their credit cards you’ll probably get a healthy dose of unsolicited advice along with your share of the bill.
(And yes, I see the irony that I write, blog, tweet, and talk about credit on a regular basis)
I don’t doubt that you hang out with some very educated and intelligent people, but when it comes to credit advice the vast majority of your friends have no idea what they are talking about.
Sorry Ryan, I know that you had good intentions.
This is because most of your friends adhere to something that I call conventional credit card wisdom, which is a misguided set of information that surrounds credit and credit scores. It is generally bad advice that is the result of applying logic to a less than logical system.
And it spreads like wildfire.
Because conventional credit card wisdom makes sense.
It’s no different than conventional fitness advice. Ask most people how to lose belly fat and they’ll have you on the ground doing crunches in no time. After all, doing a stomach workout will target your stomach fat right? (Hint: You’ll find me running on the track)
It’s not that your friends are trying to deceive you. They are simply regurgitating the same bad advice that was given to them. With so much of it out there it can be difficult to avoid.
Let’s take a look at a few examples to see what I mean. Stop me if you have heard any of these before.
- “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 refuses to die.
But it’s the truth. Following any one of those tips would be a bad move from a credit standpoint. We will talk about these and other popular credit myths in a future blog post.
So for now we will stick to one major point.
Credit scoring is not intuitive. In fact, it is often times quite bizarre. So try not to get caught up in trying to rationalize it. More importantly, don’t allow anyone else to try to rationalize it for you.
Instead, take the time to learn how your credit score works. My blog is a great place to get started.
Over the next few weeks we will take a look at how your score is calculated, dispel a few common myths about credit and credit cards, and talk about how you can make your credit score work for you. (Spoiler alert: it can help you earn tons of cheap/free travel).