Tags: Credit | myths | cost | protect

Forbes: 10 Common Credit Myths That Cost You Money

Sunday, 30 Sep 2012 03:15 PM

By John Morgan

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Managing credit is a hot topic these days, for various reasons. Many Americans had their credit scores damaged during the recession. And are now trying to qualify for record low mortgage rates. Also, some employers now use credit scores to evaluate applicants.

Forbes detailed 10 common credit myths that can hurt an individual’s score:

• If you’ve done nothing wrong, your credit is fine. (Maybe not, because an estimated 70 percent of credit reports have errors in them.)

• Checking your credit will hurt your score. (Checking your own report generally does not hurt your score but errors do.)

• You check one report and see no errors. (You actually have three credit reports, from Experian, Equifax and TransUnion. All can be monitored.)

• One credit report site is the same as the others. (Many sites give you access to one report, and charges can apply. Instead, go to annualcreditreport.com, which allows you free access to all three reports once every 12 months.)

• Old debts never die. (The debt collector is unable to sue you if the debt is older than the statute of limitations in your state. If you make a payment now, it could actually reactivate that time period. If a debt is older than seven years, it should not even be on your credit report.)

• Using a debt-settlement company is a good thing. (Try to reach a settlement yourself with the creditor. Another option is to work with a nonprofit credit counselor.)

• Always close a credit card after paying it off. (This can actually hurt, since it can reduce your credit history, and it might increase your ratio of debt to credit available. Better to cut up the card and simply not use it.)

• Bankruptcy is the end of the world. (It can take seven to 10 years to be removed from your credit report, but might be better than allowing debt to continue hurting your score.)

• Maintaining a credit card balance increases one’s credit score. (Opening and using a credit card can increase your score, but keeping a balance only increases your interest payments.)

• It’s best to pay a company like LifeLock to protect your credit. (You can get free daily credit monitoring through Credit Karma. Even better, put a security freeze with each credit bureau for at most a nominal fee to prevent identity theft.)

USA.gov offers a range of additional tips on what you can do to protect your credit, including:

• Avoid offers to skip an installment payment; finance charges usually apply.

• Beware of introductory rates on credit cards; they are usually followed by higher rates.

• Avoid buying credit insurance; it’s usually a bad deal.

• Credit repair services are often scams or provide help you can do yourself.

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