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What's a bit of good advice that's really bad advice? (lemmy.world)

submitted 7 months ago by [email protected] to c/[email protected]

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You know, like "always split on 18," or "having kids is the most rewarding thing you can do in life."

What's that one bit of advice you got from a trusted friend that you know deep, deep down would just ruin your thing?

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[–] [email protected] 3 points 7 months ago (3 children)

If you want good credit, you don't pay it all off. You need recurring payments over time. If I pay it all off at once, then my credit score doesn't go up much at all. But if there's a constant debt on my card and I'm never late in paying at least the minimum required each month, then my credit score skyrockets quickly.

This is why the system is garbage. You need to spend more money to show you're excellent at managing money. It's a dumb system that makes no sense.

I pay almost everything off because it minimizes the interest I have to pay while keeping a line of credit running on the card. But it's important to keep that line of credit active, or else your credit score stagnates.

[–] [email protected] 9 points 7 months ago

Isn't that just not true?

https://www.capitalone.com/learn-grow/money-management/credit-myths/

Myth No. 5: You have to carry a credit card balance to build credit

If you don’t pay your credit card balance in full, it’s carried over to the next billing cycle and considered a revolving balance. And that unpaid balance might accrue interest.

You don’t need to carry a balance to build credit. According to the CFPB, “Paying off your credit cards in full every month is the best way to improve a credit score or maintain a good one.”

Fact No. 5: You don’t have to carry a credit card balance to build credit

While carrying a balance isn’t necessary to build credit, a healthy credit utilization ratio—which measures how much available credit a person is using—is an important part of credit.

In addition to paying off credit card balances in full every month, the CFPB recommends keeping a credit utilization rate of less than 30% of your available credit. That can be a way to show you’re responsible with credit.

I pay my credit cards in full every month and accrue zero interest and have excellent credit...

[–] [email protected] 5 points 7 months ago* (last edited 7 months ago)

I’ve got a high credit score and I’ve never not paid it off in full. It's only really ever went up over the years, with the occasional tiny 1-3 digit drop. I'd never pay interest I don't need to in exchange for a higher rating; they've got enough money.

[–] [email protected] 4 points 7 months ago* (last edited 7 months ago)

Yeah no. Pay the entire statement balance every month, that's the whole point. If you want to do debt stuff I guess you can get a mortgage or a car loan or a school loan, but these are not requirements for good credit. You use the card, you pay the card, you now have 100% on time payments and probably low credit utilization. Get a card early so average account age high if you can, and don't get lots of hard credit checks in a row.

You can literally get free credit checks through most banks or directly from places like Experian and see what it is that affects your particular score.

Don't pay 18 or 25% interest on anything, that's nutty.