Watch CBS News

On Your Side: Common credit mistakes

On Your Side: Spring cleaning your credit
On Your Side: Spring cleaning your credit 03:53

March is National Credit Education Month. And according to a new survey out by U.S. News & World Report, Americans are in need of some credit education.

A lot of people think carrying a balance on your credit cards helps to raise your credit score. This is false.

But there are ways to boost your score that are pretty simple to do. Most of us know how important it is.

Nearly half of people surveyed by U.S. News & World Report don't know how credit works.

One of the biggest misconceptions is that a salary or income increase boosts your credit.

"Let's say you make $40,000 a year, or $400,000 a year. It doesn't matter how much money you make. You can still have a great score as long as you have great credit habits," said U.S. News & World Report Credit Card Expert Beverly Harzog.

The second biggest credit mistake, according to the survey: Carrying a balance on your credit card improves your credit score.

"Credit is not intuitive, and I think that people feel that if they carry a balance, it shows that they can handle credit, they're using credit successfully. But when you carry a balance you're paying compound interest on that balance," said Harzog.

Harzog says now is the time to do a spring cleaning of your credit.

Your credit score makeup:

  • Your payment history makes up 35 percent of your FICO Score
  • The amount owed accounts for 30 percent
  • The length of your credit history makes up 15 percent
  • New lines of credit make up 10 percent
  • The mix of credit you have, from mortgages to auto loans to credit cards, is responsible for the last 10 percent of your credit score.

Beverly Harzog says the best way to have a healthy credit score is to keep the ratio of how much you spend to how much credit you're approved for below 30 percent.

"But here is an insider tip: If you really want to boost that score, lower your ratio to 10 percent and you will really see your score go up in a hurry," said Harzog.

Having multiple credit cards is OK, according to our credit expert. Just don't apply for too many at once.  A "hard inquiry" on your credit when you open a new card or take out a loan will decrease your score by up to 5 points per inquiry.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.