Money Myths: 10 Ways We Fool Ourselves About Managing Credit
Dear Readers: April Fools' Day can make for a good joke, but there are certain myths about money that, if not dispelled quickly, are no laughing matter. Misconceptions about credit and debt are right at the top of the list. Here are 10 common beliefs about credit that can lead to financial trouble. Don't fall for them!
Myth No. 1: A Credit Score Is Only Important if You Need to Borrow Money.
If only it were that simple. Of course, your credit score impacts your ability to borrow, but nowadays, it can affect many other areas of your life including:
-- Interest rates: Whether you're looking to finance a home, a car or a washer and dryer, the better your credit score, the lower the interest rate you may be offered.
-- Renting a new home: A prospective landlord can run a credit check to see if you're a good risk. Things like late payments and collections not only lower your score; they can be a deal breaker when it comes to renting.
-- Insurance premiums: In some states, insurance companies use credit-based insurance scores to determine your premiums. A poor credit score can increase your costs for home and auto insurance.
-- Job prospects: More and more companies use your credit history when screening for jobs. This can impact your ability to get -- and keep -- a job, as well as your eligibility for a promotion.
-- Security clearance or military deployment: For federal workers in national security positions, including members of the military, late payments, collections, bounced checks, large debts or credit report errors can upend your career, jeopardizing deployment or a promotion.
Myth No. 2: Carrying a High Balance Helps Build Credit Faster.
The only thing carrying a credit card balance builds is your interest payment -- and the total cost of what you financed. To build credit, it's much better to pay off what you charge each month and never carry a balance.