Some people will advise you to avoid debt at all costs while others point out that it is a necessity of life. As you navigate the waters of credit and debt today, the mixed messages can become overwhelming. Below are some of the most common myths that lead to misunderstandings about debt today.
- The Best Credit Is Retail
Although retail credit cards are pretty easy to get and very tempting, they leave much to be desired once you look past all the frills they use to entice you to sign. They usually come with extremely high interest rates, which can often be far higher than those you get from a traditional credit card.
- People In Debt Are Irresponsible
It’s is true that some people get into debt because of overspending or not paying on time, however there are just as many other people who are in debt because of events that were out of their control. They could have lost their job, fallen ill, had an accident, or just are struggling with the overall cost of living. These people are not aware of the debt settlement programs that can help them to get out from debt.
- You Are Responsible For Your Spouse’s Debt
While many couples do work together to pay down debt, your spouse is not legally required to pay for anything you obtained before the wedding date. However, if you refinance a loan together then you will be considered responsible for repaying that obligation.
- Bankruptcy Will Ruin You
When it comes to getting debt free, many believe that bankruptcy will ruin their chances at credit. While it does stay on your credit report for ten years, it can work to improve your score because once you have discharged your debts, your score will automatically start to improve.
- You Can Borrow To Pay Off Debt
This can throw you into a vicious cycle where you are constantly borrowing money to pay back someone else. In fact, it can even make your situation worse as you are likely going to accrue more interest on the borrowed money. It can put you on a path that you can never get off.
- Paying On Time Will Improve Your Credit Score
Paying your bills on time does little to improve your score. However, if you consistently pay late it can do quite a bit of damage to your FICO. In fact, any negative information on your credit can be very damaging. Positive efforts on your part will do very little to push your score the other way.
- You Only Owe Half Of The Debt After A Divorce
If you and your spouse entered into a joint debt together you are both equally responsible for discharging that debt, but that doesn’t mean that you owe only half. If your former spouse is unable to pay, then the creditors can come after you for the entire amount.
- You Only Need To Make The Minimum Payment
If you pay only the minimum payment, you will see your debt go down in very small increments. With interest charges accruing each month there will be only a small amount of your payment applied to the principal. The best option is to pay as much as you can towards the total balance so more money will go to lower the principal balance and you can pay it off quicker.
- A High Credit Score Means You’ll Get The Lowest Interest Rates
Credit card companies are busy enticing people to apply for their cards, but you must be careful. While the rewards and other offers can look appealing, they usually come with higher interest rates regardless of your credit score. Always read the fine print to make sure you’re getting the best deal you can get.
It can be quite confusing to discern the facts when it comes to credit. It’s an ever-changing landscape so once you learn something, it can quickly change. However, if you are diligent in doing your research, reading the fine print, and focusing on what’s important you can find that credit can be your best friend in these tough economic times.
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