Credit cards and credit score myths revealed


Before you're tempted to sign up, we have some important advice about common credit card misconceptions.

There is a lot of confusion over how opening a new credit card account or closing an old one affects your credit score, but Consumer Reports has the details.

As you pull them out of your mailbox, credit card offers can seem so enticing with promises of zero percent introductory interest rates, attractive cash-back options and no annual fees. It may seem like the ideal time to get a new credit card.

But Consumer Reports' Chris Fichera says be aware that your credit score can be hurt temporarily when you apply for new cards.

"Each time you apply for a card, your credit score can take a hit, and you might not want to risk that if you're applying for a mortgage or other significant loan in the near future," Fichera said.

But if you already have a lot of cards, don't worry. Contrary to popular belief, having several cards may actually help your credit score -- if you use them wisely.

"The more credit you have available, the better it is for your credit score. But you still have to keep your spending well under your card limits and keep making your payments on time," Fichera said.

Another common misconception is that you should hold on to your oldest credit card no matter what.

"How long you've had credit does count for 15 percent of your credit score. But even after you ditch a card, it can still count toward your score for as long as 10 years," Fichera said.

So if your overall credit history is healthy, it may be a good time to get rid of your old cards if you don't like their terms. But do check carefully for any fees, like on balance transfers, and make sure you know what the annual percentage rate will be once the introductory rate expires.

If you do apply for a new card and it affects your credit score, the damage will only last six months. Of course that is if you maintain healthy spending habits.

Since you buy prepaid credit cards with cash, they do not really show up on your credit score, but you could look at a secured credit card. That's one you where you put cash into an account and draw from it by using the card.

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