Credit Myths

Credit Myths

 

Myth #1 – Your Credit Remains “Good” By Making Minimum Payments

This is not true. 30% of your credit score depends on the balances in which you owe. If lenders see that you are making only the minimum payments to these balances, they do not see progress in paying things off.

Having a standing balance can absolutely affect your ability to get a loan, so the best thing to do is set a budget, stick to it, and work at decreasing all of your debt. To achieve freedom debt relief, pay off your highest interest credit cards first, as quickly as you can, before working on paying off the lower interest cards.

 

 

Myth #2 – A Collection Will Be Removed from Your Record Once Paid

False. If you pay off a bill that has been sent to collections, it shows up as a paid collection, but continues to show you had difficulty paying the bill. It does not get removed from your record. In fact, it will take 5 years to be removed from your record.

This could cause serious issues if you try to be approved for a loan because it may be difficult to prove you will make the required payments.

The best plan of action in this situation is to contact the person or business in question and sort out a re-payment plan. Many businesses will have payment plans set in place for people that are unable to pay in full.

 

 

Myth #3 – Only Errors That Involve Pay Offs Or Balances Affect Your Credit Score

Always verify the information on your record, including your name, address, birth date, and social security number.

If there is any wrong information, this can affect your scores, especially if someone else’s information gets mixed into your score. If you do discover an error in information, get it resolved immediately.

 

 

Myth #4 – 0% Financing Deals Are Great

Many people think 0% financing is a deal. It’s not a deal at all! Avoid 0% financing at all costs because if you do not pay off your loan before the “promotion” ends, you will likely run into trouble. For example, if you are late with the payments once they come due, it will hit your credit score in a negative way.

Even if the balance owing is very small, if you are late once and that interest comes into effect, the associated finance company can charge you for the entire interest owed. This means that if you are just 2 days late on one payment, the financing company can send you a bill for $1,500.00 or more (depending on the amount of your loan and the interest rate) in back interest owed.

In conclusion, do not ever do 0% financing, unless you intend to pay your loan off early!

 

 

Myth #5 – Identity Theft Only Happens From Strangers

Oftentimes, the victims of identity theft know their thieves – family members, roommates, or other acquaintances.

Always keep your personal information secure and never share your ID pins with anyone, not even with your spouse. Open up a joint account in both of your names and make agreements on purchases to be made, if you do wish to have a shared account.

 

 

Myth #6 – It’s Not Safe To Shop And Do Banking On-line

When you visit a website with an https:// address, this indicates it is a secure web site. When you shop or do banking online, ensure your anti-virus and anti-spyware protection are enabled and up to date.

To ensure computer safety, clear all browsing history, once you are finished at the web site.

 

 

Myth #7 Debit Cards And Credit Cards Are Equally Safe

Many people do not realize that debit cards are the equivalent of a bank account. This means that they give people direct access to your money, if shared. If you use a credit card instead, you can review all the transactions and dispute the one(s) that you find to be suspicious. This is not the same case with your debit card because the money is already gone if used fraudulently.