The average U.S. household carries $5000 debt in credit card balance, according to report of 2016 data by the Federal Reserve. Unfortunately, there has been a number of myths which misguides consumers when it comes to sound financial practices. The top five myths about your credit score are underlined below:
- MYTH 1:The government owns the credit bureaus and the credit bureaus report people as having either good or bad credit.
FACT is credit reporting agencies are not actually owned by the government, although there are many laws that regulate how they must operate. Credit reporting companies do not make false assumptions on information in credit reports. They are obliged to compile information that is provided directly and voluntarily by consumer lenders. The information is likely comprised of credit cards, home or auto loans or other monthly payments. Lenders use that information to help them assess the risk of lending to an individual.
- MYTH 2: A divorce does not impact credit scores.
FACT is divorce proceedings don’t affect credit reports directly but the financial issues that are embroiled in the divorce process often involve joint credit accounts, and those very much affect credit history and credit scores. Each individual associated with the account are reported for their accounts, so if one spouse is listed as a joint owner, cosigner or authorized user, he or she must deal with that account prior to the divorce. Which clearly states that closing the account completely or ensuring that one name is totally removed from the account. Many divorcing couples get the confusion of the role of the divorce decree. A divorce decree specifies the one who is held responsible for the account opened during the marriage, but it doesn’t actually break the contracts with the lenders.
- MYTH 3: Check cards can help credit reports and scores.
FACT is Check cards, more commonly referred to as debit cards, are nothing more than plastic access to a checking account. Since checking accounts aren’t recognized as an extension of credit, they don’t end up on credit reports.
- MYTH 4: Good credit associates how much money a consumer has in the bank.
FACT is how much money consumers have in the bank has never affected the credit scores. A bank account affects your credit scores if a consumer bounces checks and does not pay the money back. Information will show up on a credit report if the balance owed to the bank gets turned over to a collection agency.
- MYTH 5: Once a credit score is bad, it can never be rebuilt.
FACT is a credit report is just a credit history and it can be rebuilt over time. It is not actually a record of all credit opened in a consumer’s name. Late or missed payments stays there on your report for up to seven years. Rebuilding your credit means paying on time, looking for better credit options and more importantly learning more about credit.