If I were to ask you what is the most common form of consumer debt today, what would you say? OK, our title gives it away. But admit it if it’s true, wouldn’t you have thought either mortgages or car loans? In fact, the most common form of consumer debt today is the credit card.

Unfortunately, it is also the most poorly managed. In the past, it was quite expensive and confusing for average consumers to access their credit scores or reports. This led to the proliferation of rumors on the best way to manage credit. A negative effect of these rumors is that if you believe them, you may actually end up harming your credit score.

Here are some myths and little-known truths regarding credit cards that will help you improve your credit.

Carrying a balance enhances your credit score – False!

When you use too much of your balance, you are seen as a higher risk. Lenders want to see that you are capable of using credit wisely; nevertheless, this can be demonstrated without paying a single penny of interest! Paying off your credit cards at the end of each month can go a long way in boosting your credit score. If you have to carry a balance, it’s best to try to keep it below 30% of the limit.

Cards that are not being used should be closed – False!

If a card doesn’t charge an annual fee, keeping it open might prove to be advantageous even if you are not using it. Having more open accounts results in a higher combined credit limit and a lower credit card utilization rate – an important factor for calculating credit scores. Ideally, you should ensure that your credit utilization rate remains below 30%. Closing a card may also lower the average age of your accounts, especially if you close a card that is significantly older than others. Hence, retaining cards actually helps enhance your scores, as long as you don’t give in to the temptation to charge more on those accounts!

Adding authorized users is a smart way to build positive credit – True!

When using personal or business credit, you can add an authorized user onto your account to create more history which will amount to a higher credit limit, and more rewards points (which means free travel or cash back). For people with lower credit scores, becoming an authorized user on someone else’s account will allow them to access funding they otherwise could not have. Authorized users are not solely responsible for the associated debt, but they can use the cards and pay them off as if they were. Being an authorized user on another person’s account is a great, quick way to build positive credit.

Using personal credit cards is a good way for real estate investors and entrepreneurs to fund a business – False!

This is a painful mistake that many of our real estate investor and entrepreneur clients (and others) have made. When you launch, or continue to grow, your business and invest in marketing, inventory, real estate -whatever it is – make sure you do not put all of your business expenses on your personal credit cards, or even a HELOC. The best and smartest thing you can do is to begin using business credit. This will allow you to save your personal credit reputation while continuing to grow your business in the most efficient manner. Credit is a great asset to any real estate investor/entrepreneur. While a relatively small percentage of people are using them correctly, there are many business loans that can be used for any business or real estate expense, that are available at zero interest and do not appear on your personal credit report. Using this type of business credit will allow you to increase your revenues without putting your personal credit scores and history at stake.

Credit cards are expensive – False!

For years, only the wealthy benefited from owning credit cards. This was mainly due to expensive annual fees and the fact that most establishments which accepted them were high-end. Today however, almost anyone with decent credit can use and benefit from credit cards. Given the intense competition in the credit industry, there are dozens of rewards programs and 0% promotions which a card holder can use to save money. Reward cards can often times balance out the expense of annual fees, turning them from a net negative into a net positive through either free hotel stays, free airline travel, or even enhanced cash back.

Using credit cards for daily expenses can be beneficial, and may even put money back in your pocket. However, you must make sure that you are careful and disciplined in your approach. Call us 800-996-0270 to learn more about getting large amounts of zero interest personal and business credit, all created and done for you.