When you pay off your credit card debt, you will almost certainly have a better credit score, right? Or will you? There are many confusing myths out there about credit card debt and loans. It may sometimes be easier to believe what you hear, especially if you don’t have a financial adviser to guide you.
While it may seem like a harmless myth at first. However, if you are not careful, your borrowing capacity may be adversely affected if you choose to act without consulting a financial professional first. Here are a few myths about credit cards and borrowing capacity you may have already heard, debunked for you.
Credit Card Myths That May Be Hindering Your Borrowing Capacity
1 – Getting A Credit Card Will Improve Your Credit Score
This myth says that simply having a credit card and paying at least the minimum amount due will show that you are a good payer and will increase your credit score. However, this is not always true. There are many factors involved when it comes to the computation of credit score, and even if you have a credit card that you pay regularly, this may not have a positive effect on your credit score.
2 – GE Creditline Cards Are Forgotten About Once Paid Off
GE offers an interest-free loan that may be used to purchase furniture and pay for it in instalments. This credit line, even when you are able to successfully pay it off will stay on your record. It will not be automatically erased from your credit report once you pay it off.
3 – Not Using Your Credit Card Will Not Require You To Declare It As A Liability
If you fail to declare your credit card as part of the list of your liabilities when you apply for a mortgage or a loan, it will still appear on your credit report even if you have not used the credit card in months.
4 – You Need A Credit Card Because Of The Perks And Benefits
Only applying for a credit card for the sake of the perks and benefits is not a good enough reason to apply for a credit card. If you do not need a credit card, it is best that you do not apply for one. Keep in mind that having a credit card will not automatically mean that you will be able to increase your borrowing capacity.
Conclusion
Many people have the notion that having a credit card is an absolute must, especially when one is trying to establish a good credit score and credit history. However, if you are trying to increase your borrowing capacity, take caution when using your credit card. Experts say that if you do not need credit, you should not apply for it. While it is true that it may help you establish and build your credit history, in many cases, there is so much written in the fine print of credit cards that we had better hold off if we do not really need it.
If you are looking for better ways to increase your borrowing capacity, instead of applying for a new credit card that you do not need, it may be a better idea to approach a financial institution and get a financial adviser to weigh in. These professionals will be able to assess your current situation and tell you the best strategy you can take to increase your borrowing capacity.
Whether you need assistance in getting a higher borrowing capacity or if you need a mortgage loan, FinanceCorp will be glad to assist you. All of the Finance Managers at FinanceCorp are fully qualified, trained, and experienced mortgage professionals who live and breathe finance. Come and visit us and let us help you with your financing needs.