Building a strong credit score is one of the best financial moves you can make. Credit cards are great tools to help you build your credit score if you know how to go about it. If your credit card literacy is lacking, however, you can just as quickly get yourself into trouble, with your financial future buried under piles of credit card debt.
Do you know how credit cards work? Have you bought into some of the many myths that circulate about how credit cards impact your credit score? Find out how much you know about credit cards with this true or false quiz.
Correct Answer: False. When it comes to building your credit score, credit cards are more useful than cash or debit payments. Not having any debt history means that you do not have a credit score, which makes it incredibly difficult to secure a substantial loan or access other financial instruments.
Correct Answer: False. Carrying a balance does not hurt your credit score, but it does not boost it either, so in this respect, making minimum payments achieves nothing at all. On the other hand, by carrying a balance, you will incur extra costs in interest. To avoid these extra costs, pay your credit card bills on time and in full every month.
Correct Answer: True. When you apply for a new credit card, your credit score may take an initial hit due to the inquiry/pull that you make. If you are a responsible individual, however, and do not increase your spending, the extra credit available through your new card will improve your credit utilization ratio, and with it your credit score.
Correct answer: False. While it may help you avoid more credit card debt, the closing of a card will also reduce your available credit limit and thus hurt your credit utilization ratio, which could impact your credit score negatively.
Correct answer: False. Your card may still incur interest, even if you have paid off your balance in its entirety. Your lender calculates interest for the period between your billing and your payment. This interest is called residual interest.
Correct Answer: False. Credit agencies are looking for a "healthy" mix of credit on your report to prove that you are comfortable with debt and capable of responsibly handling it. Such a healthy mix ideally includes mortgages, student loans, and other types of credit, in addition to your credit card debt.
Your results:
7-8 correct answers. You have a solid grasp of how credit works, and you understand the role of credit cards in the makeup of your credit score.
5-6 correct answers. You know how credit cards work. Your tendency to believe some myths is not helpful, however.
3-4 correct answers. Your knowledge of credit and credit cards is superficial. Understanding the concepts discussed in this quiz is essential for your financial well-being.
1-2 correct answers. You do not understand how credit cards work and how they impact your credit score. You have hopefully improved your knowledge of credit cards through this quiz.
Are you worried about mounting credit card debt? Contact a ClearOne Certified Debt Specialist to find out how you can best address it and get a free savings estimate.
I cannot thank everyone at ClearOne enough from the account managers to customer service to negotiations everyone was very helpful along the way.
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Please note that all calls with the company may be recorded or monitored for quality assurance and training purposes. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 50% before fees, or 30% including our fees, over 24 to 60 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating. C.P.D. Reg. No. T.S. 12-03822
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