Credit is remains an uncharted mystery to far too many people, especially those with bad credit. They don’t know how to monitor it, how to take care of it, or what factors go into getting it. There are a ton of myths out there about credit, and these can cause a lot of trouble for those who buy into them. Here are a few credit-related myths, and the truth behind them.
You Need It to Get It
People think that credit is this nebulous Catch-22 where if you don’t already have it, you can’t get it. This is untrue. Lenders look at public records, account history, other credit applications, identification and background as well as prior credit history when an application comes in. If you don’t have credit, you may need to find someone to co-sign on your application, but it is possible to get credit without having it. Otherwise, how would anyone establish a history?
Bad Credit Can’t Be Rebuilt
People fear that once they have a negative mark on their credit report, it never goes away and that bad credit can never be fixed. Again, this is far from true. Indeed, almost everyone has a black mark somewhere in their report. All your report shows is a history. Eventually those negative elements will fade in favor of newer ones. Thus, bad credit can certainly be rebuilt. It takes time; many missed or late payments stick around for up to seven years. But good history can help to offset bad.
More Highly Educated People Get Credit Easier
Again, this is not true. Education does not even factor into your credit report and a high school dropout can feasibly have better credit than someone with a doctorate. The only elements that go into your credit history are debt-related information. Tax liens, bankruptcy, mortgages, loans and credit cards are each considered.
In fact, the only indicators of education that might show are student loans. While these may be considered “good” debt, they appear because they are government secured and low interest, not because they show demonstrate educational achievements.
Paying off a Debt Removes It from My Report
This is very much untrue. Any debt will stay on your report for up to seven years. Bankruptcy filings remain for ten years. Rather than disappearing from your record, debt will be reported as “paid” on your credit report, which can help to change a bad element into a neutral or good one. Paying off your debts will help to improve your credit report, but they will not simply vanish from existence.
A Debit Card Will Build Credit
Debit cards have no effect at all on your credit. Even though they might carry the symbol of a credit card (Visa or MasterCard being the most common), they simply allow you to access the money in your bank account. Since this money is yours and not a credit line, it does not touch your credit report.
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