We’re all aware of the importance of having great credit scores, but sometimes figuring out how to get that stellar credit score is like cracking the code to the secret sauce at your favorite burger joint.

The result is that over the years, dozens of credit scoring myths and misunderstandings have popped up as people have attempted to get their financial lives in order. Here are my top five in descending order.

Top Five Myths About FICO Scores

5. “Canceling credit cards will improve my credit score.” FICO is all about your past – 15 percent of your score includes the age of your oldest account, along with the average age of your credit accounts. Closing down old accounts essentially wipes out all of the hard work you’ve done to establish a long, trusting relationship with a lender.

Even more, closing old credit cards can cripple your credit utilization ratio, which is 30 percent of your overall score. If you throw away available credit that has been offered to you, your utilization rate will rise and lenders may think you’re too strapped for new credit. You want to keep that utilization rate at least below 30 percent.

4. “There is only one credit score that matters.” I can’t begin to tell you how often people are surprised that they have three separate FICO credit scores. A lender can pull from any or all of the different bureaus (Experian, Equifax, and TransUnion), and each of the bureaus will have varying information. As it is hard to ever know which bureau your lender may use, you should check and build your credit score with each major credit reporting agency.

3. “I never miss a payment, so I don’t need to check my credit score.” Just because you have never missed a payment does not mean your credit is spotless. Having cards closed from inactivity, high balances, or fraud can destroy your credit. Everybody, and I mean everybody, should check their scores at least once a year. If you want to be more proactive, there are some fantastic identity theft services that can help you keep an even closer eye on your scores.

2. “My credit score is beyond repair.” No credit score is beyond repair! I have watched with my own two eyes as clients have taken their credit scores from the low 400s to the low 700s. The increase slows as the score gets higher, but the ability to improve your score, regardless of what it may be now, is undeniable. That’s the beauty of it.

1. “I don’t need to worry about credit.” This is arguably the most common myth that persists in the world today, and it is simply wrong. In today’s world, the only ways you can possibly get away with not worrying about your credit is if you’re so wealthy you never need to rely on credit or you’re over 80 years old!

Other than that, each time you apply for work, a new place to live, or for any type of financial product, your credit will be evaluated. If your score isn’t above 700, things may be tough for you. On top of that, finances are known as one of the most stressful points in a person’s life, and your credit score directly affects your financial profile.

As you work on building your credit scores, don’t be afraid to ask questions! These are some of the most important personal financial decisions you can be making, so you don’t want to get hung up in the process by any other myths.  And trust me, there are unfortunately a lot floating around out there.

It’s a common misconception that entering a credit counseling program will ruin your credit scores.  Unfortunately, this misunderstanding scares thousands of consumers away from a service they could really benefit from using before their credit problems get out of control.

It’s easy understand why a lot people believe this credit myth, since it makes sense that meeting with a counselor indicates you might be experiencing difficulty with your credit and need guidance.    If I were lending you money, like a credit card company does, that would worry me too.

However, the truth is that working with a credit counselor will not, in and of itself, have any effect on your FICO scores. According to Fair Isaac, creator of the FICO credit score, “whether or not you are participating in credit counseling of any kind” is not considered in your credit score.  It can’t get much clearer than that.

This doesn’t mean that participating in a credit counseling program won’t make it more difficult to get approved for credit products.  I tend to compare credit counseling to something like “income” when I talk to people about how potential lenders will view their credit risk.

While your income isn’t taken into consideration by credit scoring models, your ability to get approved for credit can most certainly be affected by the size of your paycheck.  Credit counseling has the opposite effect.  It won’t directly hurt your credit scores either, but any real human being reviewing an application for credit will have concerns once they realize you’re in a credit counseling program.

That said, if you’re only concerned about getting your finances straight and have no interest in applying for new credit, this is nothing to worry about.  Getting your credit back on track is the only thing that should matter.  Applying for new credit cards shouldn’t even be on the radar if you’re already headed down the wrong path.

So don’t be afraid to enlist the service of a reputable credit counselor well before you find yourself in financial trouble, missing monthly payments or dodging calls from debt collectors.  In fact, the best time to reach out for help is when there’s still plenty of time to develop a financial plan and keep your good credit where it belongs.

The National Foundation for Credit Counseling is a great place to begin your search for reputable credit counseling firms that are more interested in your bottom line than theirs.

It’s a question we hear all the time from credit card users, especially in the younger demographic: “So what if I have bad credit?  I don’t have anything I need to go into debt for anyway.”

This is a very risky line of thinking.  While young consumers (particularly students) may not be thinking about their credit at this stage in their life, they’re just around the corner from having it be an all-encompassing aspect of their adult lives.

Having bad credit doesn’t just impact your ability to take out loans.  There are several ways having bad credit can act as a major hindrance to aspects of your financial life as an adult:

• Renting an apartment- While you may have money in the bank and a stable income, if you have bad credit, most building owners won’t let you lease from them.  This will limit your options dramatically and make your search for housing a living nightmare.
• Increased insurance premiums- Insurance companies always look for increased risk amongst certain demographics.  And wouldn’t you know it, they’ve noticed a correlation between bad credit and auto claims.  Thus, if you have bad credit, insurance companies can jack up the premium of your auto insurance even if you have a pristine driving record.
• Finding a job- Many companies use credit checks as a way to see if a job candidate is trustworthy.  In the finance industry, most companies require an employee to have good-to-excellent credit in order to even apply for a position.
• Higher interest rates- Looking for no annual fee credit cards or low interest credit cards? Not a chance, if you have a low credit score. Additionally, your bad credit will make creditors less likely to loan to you, and those that do will certainly charge higher interest rates.  This can cripple your ability to start a new business, pay for a car, or put a down payment on a house.

As you can see, having bad credit can create enormous roadblocks in your life.  Unfortunately, patterns of missed payments early in your life can still have strong repercussions years down the road as well.  Thus, it’s essential to always pay your credit cards in full and on time from an early age.

Check out this blog post if you want to read more details about how to improve your credit.

Who doesn’t love the Jetsons? They had just about every far-flung technological idea imaginable, including hovercrafts, personal robot slaves and cities in the sky…but they didn’t have 0% interest credit cards.  Even the Jetsons were still using cash in 2062!

We may not have reached the Jetson’s level of space-age sophistication quite yet, but we’ve certainly got them beat in the payments department. So what kind of technological advancements will the next 50 years bring us in credit, credit cards, and credit scoring techniques?

As I was thinking of how to respond to my own rhetoric, I brainstormed a bit and produced a pretty exhaustive list including: NFC chips, retina scanners, fingerprint identification technology, voice and DNA recognition, in-flesh microchip embedding, mortgage checking accounts, and even 401k or IRA credit cards. I also think we’ll clearly see hundreds of mobile apps developed for exchanging funds electronically via mobile devices.

Similarly, I also thought about general market predictions which will have an impact on credit, credit cards, credit scoring, mortgage rates and overall monetary flow and investing. This side of the equation could stress you out, especially if you tend to believe all the apocalyptic, hyper-inflation-touting scarecrows out there. If you are on the far end of the believing spectrum, you probably tore up all your credit cards when you paid them off back in late 2008 after the bottom dropped out of the market.

The fact is there will always be a group of creative and motivated entrepreneurs looking for ways to build new financial instruments and promote them to the masses. Personally, I don’t see things changing too drastically. Slow developments will most likely be the norm, but I do see mobile devices replacing wallets as the biggest leap in the credit card markets since plastic first came of age.

Certainly greater regulation may infiltrate the market as governmental agencies continue to attempt to protect the consuming populace from predatory financial products. In addition, I could even see credit eventually becoming something that is managed in the cloud and recognized through something as simple as a retina scan or finger print. Frankly, that sounds more like Minority Report than the Jetsons!

Have you given it some thought?  If so, what do you see in the future of credit?

Close your eyes and imagine your boyfriend is taking you on a romantic date for your birthday.  Admittedly, your boyfriend is kind of a scrub, and rarely pays for your meals, but this is an extraordinary day that you’ve waited all year for, so you’re expecting him to pick up the tab this time around.  You lift the menu from the elegant white tablecloth and begin perusing the decadent options.  You’ve been thinking about getting a world-class steak all day, and the peppercorn filet mignon with garlic mashed potatoes gets your mouth watering.

“Darling, I think I’ll go with the filet this evening,” you say in an appreciative tone.

“No can do, my dear,” he says with a warm and loving smile.

“Why not?!” you bark back instantly.

“It’s just not the ideal time for me to treat you to a steak.  I know it’s your birthday today, but where is it written in stone that I’m obligated to do nice things for you on this exact date?  Now, if you want a steak during the slow months of January-March, I’d be happy to do that for you… As long as it’s on a Tuesday.  After 9 p.m.”

Stop imagining.  Did this situation give you a bizarre feeling of déjà vu?  Sorry, it’s not because you’re clairvoyant.  You’re just one of the millions who have experienced the inconvenient reality of blackout dates on rewards credit cards.

Let’s examine why rewards cards blackout dates exist, and how you can avoid them.

Credit card blackout dates explained

One of the most disappointing aspects of rewards cards is the potential for inhibiting blackout dates.  Imagine taking the time to save up all the travel rewards miles needed to get a free plane ticket, only to find that you can only redeem them on one of the least desirable travel dates.  That’s like waiting all year for your birthday, only to find that your presents will be given to you on a random Monday, three months late.

Why do blackout dates exist?  One reason is simple economics. Because airlines would rather have people pay for seats on planes that they know are going to be full (and will fetch higher fares), they relegate seats on flights that typically have empty seats (sold at lower fares) for use on rewards cards.

How to avoid blackout dates

In short, read the fine print.  There are actually plenty of credit cards that offer travel rewards with no blackout dates, but they may impose other inconveniences like expiration dates or capped rewards.     The only way to know whether you’re going to get a good deal or not is to read the fine print at the bottom of the applications. The ideal rewards card shouldn’t have any hurdles to jump over when you want to redeem your miles.

Smart scheduling can also help you avoid blackout dates. Since they typically occur on days around major holidays, like Christmas or Thanksgiving, try scheduling your flight for the actual day of the holiday. Another strategy is to extend your travel by a few days. Rather than fly on Labor Day, one of the biggest travel days of the year, take an extra day or two off and take advantage of lower travel volumes.

Most of all, don’t be fooled by vague language or too-good-to-be-true offers.  Credit cards are required by law to explain exactly what you can expect to receive, so do your due diligence.  As long as you choose wisely, you’ll be sipping Mai Tais in an aisle seat headed to a tropical paradise in no time.  And on the date you want to travel, no less!

It can be the difference between living free from financial worries or scraping by from paycheck to paycheck. But there are several money management myths floating around that can act as roadblocks on your way to financial security.

Fear not, however, because we’re here to guide you through these myths and help establish a financial plan that’s right for you.

5 Myths of Money Management

1.) Always use rewards credit cards for big purchases

This can potentially be a dangerous line of thinking. While these types of credit cards often have fantastic rewards, they also usually have higher interest rates. So while it may seem enticing to get the boatload of airline miles that would come with a $5,000 purchase, it could cost you a lot more money in the long run if you won’t be able to pay your balance in full at the end of the month.

Stick with low interest credit cards for bigger purchases that you plan to finance. They don’t have the same frills, but they’ll end up saving you money.  Better yet, don’t even make the big purchase until you have the cash to pay it off in full.  Then you can choose whichever credit card reaps the greatest rewards.

2.) Credit cards are only for those who need to go into debt

We’ve heard this one a ton of times. Many people, especially younger folks, don’t believe they need a credit card because they’re not making any purchases that require them to go into debt. Their theory is, “If my checking account is sufficient, why complicate things by opening a credit card?”

Unfortunately, this is not a very smart course of action. You see, having a credit card opened in your name and making a few monthly purchases actually builds your credit. It demonstrates to credit card companies that you can be trusted to pay your bills in the time frame given to you. By proving your trustworthiness to credit issuers early on, you’ll get a head start on being able to make bigger purchases (like cars and houses) down the road.

Even if you’re only charging something like $15 a month on your card and immediately paying the balance, you’ll be taking a great first step with your credit.

3.) Having multiple credit cards is a bad idea

Many people are scared of having multiple credit cards in their name. They fear they will become confused by having multiple accounts, or they believe that credit card companies will think they’re being irresponsible.

This is definitely a myth. As long as you are a responsible person, having multiple credit cards will only boost your credit score by demonstrating your ability to manage multiple accounts. It’s also great to have a back-up credit card in case your primary one gets stolen or reissued. While you should only do what you can handle, having multiple credit cards is a great idea. Again, this is only for responsible people. And no, this doesn’t mean you should have a dozen cards!

4.) Coupons are the best way to save

People sometimes go crazy for coupons. When the Sunday paper comes, there are always some fantastic coupons just waiting to be snipped out and saved for shopping.

But coupons also trick consumers into spending more money than they would have in the first place. Every time you clip out a coupon, ask yourself if this was a product you already planned on purchasing. Even if it’s a fantastic deal, if it entices you into buying something you wouldn’t have, then every cent you spend would be going outside your normal budget. Make sure you use discretion when clipping out your next coupons.

5.) Buy it as soon as you can afford it

Got your eye on a new car or some other large purchase that you’ve been saving up for? While it may be alluring to go through with the purchase as soon as your bank account can afford it, make sure you have enough financial security to fall back on. I always ask myself before making a big purchase, “If I buy this, and the engine falls out of my car tomorrow, will I still have enough money to fix it?”

You always want to have a financial cushion for those rainy days. So hold off on the big purchases until you can truly afford them and your emergency fund is fat and happy.

As long as you reject these myths of money management, you’ll be well on your way to establishing a smart system for your own money.

That shiny piece of plastic burning a rectangle-shaped hole in your wallet is one of life’s trickiest necessities.

On the one hand, you can’t make it much farther than 25 without some line of credit to show for yourself.

On the other, credit cards are often intimidating: whole episodes of Oprah are dedicated to really good people with decades’ worth of credit card debt they didn’t mean to accrue. You’re a good person. Does that mean you are going to accrue a Kilimanjaro-sized mountain of debt as well?

The problem: credit cards and the companies that supply them are notoriously evasive when it comes to laying out their terms and conditions after they reel you in with catchy commercials. Here are 5 big credit card myths that, year after year, keep confusing consumers.

5 Most Confounding Credit Card Rumors

1. Smart debit card spending will help boost your credit score. If it swipes like a credit card and buys like a credit card, it’s basically a credit card… right? Debit card users who are smart spenders (meaning they never overdraw their accounts) sometimes assume that this will positively reflect on their credit score.

Nope: Never overdrawing your checking account is a savvy shopper’s mantra, and indicates that you are a responsible spender. But it won’t affect your credit score, and neither will accidentally overdrawing. Two separate cards, two separate functions.

2. Leaving a monthly balance will improve your credit score faster. Let your credit card issuer make some money off your account every so often by not paying the bill in full.  In return, you’ll be rewarded with good credit faster than if you had paid in full every month.

Nope: Leaving monthly balances simply equals more interest income for credit card companies.  The truth is the speed at which you establish credit has absolutely nothing to do with whether you carry a monthly balance or not.  Pay those credit card bills on time and in full—always!

3. Spending over your limit is okay as long as you pay it all back on time. Those once-in-a-lifetime, big ticket items are worth going over your credit limit every once in a while. And since you’re a great customer who always pays back on time and in full it doesn’t matter.

Nope: Even if you’re lucky and your credit score doesn’t immediately take a hit, every time you exceed your limit (even by a couple of dollars) you’ll be charged with an annoying over-limit fee. $30 or $40 might not seem like a lot, but it’s the same thing as taking a couple of Jacksons and lighting them on fire.

In addition, occasional over-spending gives your credit card issuer a reason to bump up your interest rate, which can go as high as 30% or more. And that hurts.

4. No-limit credit cards mean you can spend, spend, spend! No limits, no problems. Without a limit, Louis Vuitton, Lamborghini and a Learjet can be yours with just one swipe.

Nope: Credit cards famous for catchphrases claiming “no present spending limits” (we’re looking at you AmEx) do actually have spending limits that are based on your income, credit history, and spending habits.  A good customer with a no-limits credit card who only spends $4,000 a month won’t necessarily be able to go out and buy an island one day without some serious conversations with their credit card rep.

Likewise, those big spenders who carry around mysterious and exclusive black cards also have credit limits. It just seems limitless: those cards require minimum yearly charges of around $250,000 to be paid on time in full, and the limit is so astronomical it would be hard to try to outspend it.

5. Identity theft is impossible if you have “See ID” instead of a signature on the back of your credit card. Any schmuck can forge a signature. But could he or she forge your face? Didn’t think so.

Nope: Good try – crooks with your credit card would have a tough time without the proper ID. The problem : “see ID” isn’t actually a valid signature, and thus your card could be considered invalid at a retail store.

Beyond that, how many clerks actually look at the signature anymore?

Beyond that, if you card is stolen and used, writing “see ID” has no legal bearing and you might still be liable for charges up to $50. You’re better off signing that puppy and just keeping really good track of it.

The first step to achieving and maintaining good credit: knowing what’s fact and what’s fiction in the credit card industry.  Arm yourself with this credit knowledge – and then start spending.

Have you heard about how you can unlock your car by having someone transmit a signal from a spare remote key via your cell phone? Pretty cool, huh? Well, it doesn’t work.

Keyless remotes and cell phones operate on completely different frequencies, so don’t plan on this trick ever saving the day the next time you lock your keys in the trunk.

Regardless, I’ve heard this urban myth so many times over the past few months I even started to believe it might work. That is, until I saw it busted with my own eyes on perhaps the greatest show known to mankind—Mythbusters. Seriously, I can’t get enough of the Discovery Channel.

Similarly, we all know there are plenty of credit-scoring myths out there that spread like wildfire. Who knows where they start, but they too tend to gain incredible momentum as they spread via email forwards and conversations around the water cooler.

Here’s one I’ve received several emails about lately. It has to do with the ridiculous notion that FICO credit scores only change once a month, and it generally goes something like this.

Imagine you’re planning to buy a house this month so you pull your FICO credit scores, marked with official seal seen above, to gauge where you stand. You then march into your bank several weeks later to apply for a mortgage fully expecting that the FICO scores they pull will be the same.

Unfortunately, you’re in for a big surprise when the scores they pull are quite a bit lower than the ones you pulled earlier in the month. Now you can’t even qualify for the best rates and terms on your loan! “But these are my FICO scores”, you proclaim, presenting the old print outs. “Don’t FICO scores only change once a month?”

Wrong. The truth is FICO credit-scoring models are dynamic, which means every time something changes on your credit reports your FICO scores change as well. You can basically count on having a different FICO score every time your score is pulled.

So what’s the lesson here?

If you’re preparing to finance a big purchase, avoid doing anything that could potentially mess with your credit score in the months leading up to the big day. You really just want to keep things as normal as possible until the loan is finalized.

For example, don’t go on a shopping spree right before closing and buy all that new furniture you’ll need on your credit cards. Increased credit utilization is often the worst culprit when it comes to FICO score surprises, since your credit utilization ratio accounts for about 30 percent of your overall FICO score.

Instead, keep your credit card spending the same, utilization low, and avoid unnecessary applications for other types of credit.  The less change, the better, and your FICO scores should stay right where you want them.

Piggybacking, a technique often used to build credit by paying to become an authorized user of a stranger’s credit card account, has been under fire since it first gained widespread popularity in 2007. In practice, the loophole in the credit scoring system works great, which is perhaps why it’s ruffled the feathers of so many people that find it unfair and sleazy.

Should it really be so easy to dupe the system? Instead of slowly building my credit history one on-time payment after the next, I can simply pay someone to add a credit card with a high credit limit, low balance, and a clean payment history directly to my credit report. And voila – I instantly have stellar credit and thus a higher credit score. Millions of people have benefited from artificially boosting their credit scores this way, and there’s no doubt in my mind that many credit repair agencies have made a nice profit from connecting buyers and sellers of trade lines as well.

The controversy around piggybacking continues today. In fact, each time the topic is brought up in our Credit Talk Forum, it’s cause for a lengthy and controversial thread about whether or not the new FICO 08 model can really do what it claims. That is, weed out those individuals paying to add seasoned trade lines to their credit reports from legitimate authorized users. Of course, adding a spouse or a family member as an authorized user to help boost their credit score is nothing new. People have been doing it for ages, and it’s perfectly legal. According to the FTC, there’s nothing illegal about paying to have it done as well (although there may be some ethical questions to consider).

I’m not saying I think piggybacking is completely fair or our credit-scoring model is perfect, but once and for all I really would like to know – what’s the deal? Has piggybacking finally seen it’s day?

In a press release issued earlier this year, Fair Isaac claimed that “FICO 08 helps lenders protect against authorized-user account ‘piggybacking’ by incorporating new patent-pending technology that materially reduces the potential score impact associated with the abuse of authorized user accounts. By considering authorized user accounts in score calculations, FICO 08 continues to support lenders’ abilities to comply with federal regulations.”

Well, that makes it all so clear now. There’s a new “patent-pending” technology that separates the good from the bad. I wonder what that might be? Matching addresses somehow or weeding out unused authorized user accounts? All the possible methods have been discussed before, and none of them will work. While I have no doubt there are some really smart mathematicians working hard over at FICO day and night, I’m not quite sold on the whole secretive “patent-pending” approach that FICO has taken. It sounds more like a scare tactic to me.

There will always be a lot of speculation over this issue, so I prefer to just look at the facts. It’s a fact that authorized user accounts are still included in the FICO credit-scoring model today. We know that based upon FICO’s own words in the statement above. And we also know that the ECOA (Equal Credit Opportunity Act) precludes the removal of authorized users, and it always will until the law itself is changed.

So, until the mathematicians are willing to explain in more detail how they can magically tell whether an authorized user is a spouse or not, or Congress changes the law, I’m inclined to believe nothing much has really changed.

What do you believe?

There is still a lot of confusion among consumers about whether writing ‘See ID” on the back of a credit card is a smart move. I can certainly understand why, since there are a lot of conflicting opinions and information available on the web.

It’s tough to prove that this practice will actually prevent identity theft, but I find it hard to believe it hurts. However, as far as Visa and Mastercard are concerned, a credit card is technically not valid unless it is signed. Merchants are even instructed to not accept credit cards without signatures. I’ve personally never had this happen, but I’ve heard of certain businesses that are strict about not accepting cards with ‘See ID’ written on the signature line. The U.S. Postal Service is likely the most common culprit.

Most people have been following this practice for years because it basically makes them feel better. That’s why I do it. Why not? It does sound logical in theory. If your credit card were to fall into the hands of a thief who wanted to use it to make a purchase, the merchant should look at the back of the card and then require proof of identification before processing the transaction. Of course, that’s how it should work in theory. In reality, I can count on my toes the amount of times a merchant has even looked at my credit card over the past several months. The implementation of technology that allows consumers to swipe their own cards has become quite common at most retail locations as well. Walk into a Home Depot, Safeway, or visit the local gas station, and you don’t even have to interact with a human being to make your purchase. Just swipe your card and you are on your way.

The bottom line is there is no fool-proof method to guarantee your credit card will never be used by thieves. If it makes you feel all warm and fuzzy inside, why not sign the back of the card and write ‘See ID’ as well? It may prevent a thief from using your card to make an in-store purchase, which will save you the time and effort it takes to dispute the fraudulent charges and protect your credit score. In addition, be sure to check your credit card account online often and utilize an identity theft prevention service, such as LifeLock, for added protection. You may not be able to guarantee that a thief will never use your credit card, but the sooner you know about it, the better.