Credit myths

Credit myths

6 Common Credit Card Myths

That little rectangle of plastic burning a hole in your wallet is one of life's trickier essentials.

You can't make it much past your mid-twenties without some kind of credit line attached to your name. On the other hand, though, credit cards can get you into a lot of trouble – and by trouble, I mean debt.

Credit Myths Debunked: Are American Express Credit Cards Only for Rich People?

First and foremost, the answer to this question is an affirmative 'No', but let's get to why we're answering this question in the first place.

Yet Another FICO Credit-Scoring Myth

Have you ever 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 that 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.

Credit Scoring Myths

I’ve been hearing a lot about credit scoring myths these days in our Credit Talk forum. You've probably heard many of the ones I'm thinking of too: "quick and easy ways" to magically add points to your credit scores in a short period of time. Usually they're the same ones that have been circulating around for years, like these two favorites:

  • Close any credit card accounts you don’t use, increase your income, and your credit score will increase too!
  • Just use cash to pay for everything and your credit will be perfect!

I hope you haven’t fallen for any of these. If you have, I’m happy you're taking the time to visit this site and educate yourself about credit cards and how to use them responsibly. It's definitely a step in the right direction.

Can Medical Debt Hurt My Credit Scores?

YES! Unpaid medical debts can most definitely hurt your credit scores. Paying your medical bills on time and in full, however, will do nothing to improve them. Doesn't sound fair to the consumer now, does it? Well, it isn't, and lawmakers have even looked at legislation in the past which was written with the intention to wipe consumers' credit reports clean of "paid" medical debts that were delinquent at one point in time. The bill unfortunately never passed the House, so the issue remains unresolved.

Credit Myth: Employment History Impacts FICO Scores

Every so often an old credit myth I haven't heard in awhile will pop up again during a conversation with some friends. This past weekend it happened during a chat with a colleague about unemployment and its effect, or lack thereof, on FICO scores. Contrary to what many people think, you can be unemployed for a long period of time and still maintain excellent credit scores. The truth is the FICO credit-scoring model doesn't consider your employment history in any way, shape, or form. Like the level of your income, it's a complete non-factor.

FICO Scores Don't Care if You're Unemployed

FICO scores consider a lot of different personal information found in your credit reports, but employment history isn't one of them. In fact, according to FICO, "your salary, occupation, title, employer, date employed and employment history" are never considered by its credit-scoring model. It seems logical, right? Your employment history, income and job title don't necessarily indicate what type of credit risk you are, so why should they matter to FICO?

To Sign or Not to Sign? Does the "See ID" Practice Really Work?

ID There's 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's a great deal of conflicting information available on the web. While it’s tough to prove this practice will actually prevent identity theft, I personally 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's signed. Merchants are even instructed to not accept credit cards without signatures.

The Top Five Myths About FICO Scores

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.

Why Credit Counseling Won't Hurt Your Credit Scores

[caption id="" align="aligncenter" width="450" caption=" "]debtPhoto by Alan Cleaver[/caption]

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.


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