Common Credit Myths

Having a good credit standing is something that will be important for most people. It will allow them to get access to funds that may not otherwise be available to them, especially when they need it most. Taking care on of one’s credit score takes work. But it may also be good to know more about what can help you maintain it well. This includes knowing those credit myths that many people tend to believe. Here are some of them:

Credit scores aren’t affected as long as one regularly covers the minimum credit payments.

This is actually a myth. It is not true that once you have paid the minimum required monthly balance on your debt that your credit score will not be affected. In fact it does have an effect, depending on how long one is able to pay off a certain debt. The longer a certain debt remains the same on one’s account without it being fully repaid or even show chances of further dropping, the more it will affect one’s credit score. Paying only the minimum balance monthly may have the same effect.

Paying off collection accounts in full will instantly have it taken out of the credit report.

Collection accounts are those debts that have been past their due and have been transferred to collection agencies. It may signify that an individual may have had problems paying certain debts and which might be reflected on the credit report. Even if one pays off a collection account in full or even earlier than the agreed payment period, it may not instantly be removed from one’s credit report.

If the collection period of the debt is for five years, it can be reflected on the credit report for just as long, even when one is able to pay off the collection in just a year. Although it may not have the same effect as an open and unpaid collection account, it may nevertheless affect how creditors may see you based on your credit report. It may indicate to them that you have been having problems paying off debt in the past which, in turn may affect your credit score.

Zero percent deals are always great options to take advantage of.

Many credit cards now offer zero percent deals to attract credit card owners to use their credit line. It usually offers zero interest rate on purchases for a certain period of time. While one may think that it is a good deal to take advantage of, zero percent deals can also be a costly trap.

One reason why most zero percent deals can become a trap is that they can charge outrageous penalty charges on the credit card owner in case he or she is unable to pay the monthly payments on time. A late payment can cause the rate of the account to get as high as 25 percent. Add to that those penalty charges and one may end up paying more than he or she has bargained for. Zero percent deals are usually only for those people who are seriously disciplined to pay off their debts on time or before the promotion period ends.
Personal Finance – GuideTo.Com

Tags: , ,

Recent Comments