Do you remember stories about the aliens which built Egyptian pyramids, Chupacabra-monster and immortal people who live for centuries (remember photo of Keanu Reeves compared to the portraits of the lords of Middle Ages). Those stories are amusing, but it's kind of fiction with no real evidences, to say properly they're legends.

Legends are popular, but they're too far away from reality and the bad thing about it that they misinform people. It happens in all spheres of life, it's no matter if we talk about policy or soccer.

On this page we'll try to become kind of mythbusters in the financial sphere. There is myth about ideal credit score, it sounds like: "pay all the debts and close your old credit card accounts". There are only two legends about finances that we'll try to illuminate this time.

Interesting fact!
Firstly we need to notice: most adults in the USA (more than 90%) live in a debt. It's an ordinary thing in modern economy, in which credit cards playing an important role. Mortgages, month bills, student loans, all those things can be paid by using credit card.

If an individual controls his debts it only helps to reach out his aims and make life more convenient. But what if a person doesn't know how allot his money and take a lot of debts? Unwise use of credit cards can lead to pecuniary embarrassment.

Basic financial rules about debts and mythbustering will help you to manage money much more effective.

15 Financial Myths debunked. 

Now it's time to become more educated, here are 15 legends that should be dispelled today.

1. Legend: Paying all the debts will make your credit report insanely better. 

Sorry, but that's not right. Your credit report saves most of the data for about 7 years. Some of this information can be stored 10 years (chapter 7 bankruptcy, for example). When you pay all the debts off, it makes your credit score and report better, but it doesn't make your "shadows of the past" erase. This process takes time.

2. Legend: All types of debts are bad, they can only hurt you. 

Some people may say: "Seeing is believing", but good debts still exist in this world. You can take on debt to develop your business and make more money. Although small business loans, student loans and mortgages kind of "useful debts", but remember: all debts are risky. Small business can turn bankrupt in a moment. Good higher education doesn't mean that you'll get well-paid job. Property can become battered. We recommend to take on good debt only if you sure you can redeem it.


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3. Legend: Your credit report can be seriously damaged by late credit-card payments. 

Let's make it clear, late credit payments create high charges and bring fees. But it doesn't mean that they'll influence your credit report. Most companies don't report late credit payment to the agency until 30 days past. By the way, medical debts show up only when the bill goes into collection.

4. Legend: Marry me and repay my debts. 

A lot of couples think that by getting married you become responsible for the spouse's debt. Although, it's not true, most couples pay debts together, but there's no such law which oblige they to make it. You don't have to pay your spouse's debt, in case if it was incurred before marriage according to the John Uzleimer, president of consumer education at

5. Legend: If you look through the credit score, you know it exactly. 

It's mistake, the thing is your credit score and the one that get you lender are different. It could be worse, it could be better. I bet you have the question: What's the number of credit scores here?

No one can tall you exactly, there are dozens scores or may be even more. The well-known score is FICO, you may know this one well. But there are a lot of different variations of FICO, lender looks on the credit you're applying for and choose from different scores.

For example: for mortgages paid by John Smith or Marry White, lenders use three FICO scores, which are available directly from each of the three main credit bureaus. If you apply for credit card or auto, the lender will usually set an unusual score for that type of credit. Why there exist a lot of credit scores? The scores can vary from each credit bureau to another - TransUnion, Equifax and Experian could have different information about you. Why there exists such a mismatch? Not all lenders report to the all 3 bureaus. There can also be an interruption in updating your report in some agencies. Furthermore, there are variations of scoring models using scores from 300 to 850, each one tailored for special lenders. Nine variants of this basic model are used by FICO. Every model contains special versions that appoint risk of providing installment loans, mortgages, bank cards and auto loans. Don't be confused, you can't follow your scores of all the agencies. One or two scores is enough, the main rule: if you found any huge changes contact credit agency and ask about it.

6. Legend: If I check my credit report, it'll lower my credit score. 

That's wrong. The government gives you an opportunity to get free credit report from every national credit bureau once a year. FICO credit scoring model doesn't take into account your request for credit report, it doesn't affect your score. So, you score can't be damaged by this request.

7. Legend: It's good to make minimum payments on a debt. 

This way will not have negative effects, you'll not have to pay late fees, but it's ok only if you want to be in debt for a long time and pay a high interest rate. On the other hand, it's more advantageous to fully pay of an account every month or at least pay higher than minimum. Calculating numbers you'll change your mind about minimum payments. For example, you have $10,000 on your credit card. $200 is a projected minimum monthly payment, which is equal to 2% of the total debt, annual interest rate is 15%, you'll be paying it for about 25 years to repay the balance and it'll cost you more than $6,000 in interest. What will happen if you raise your monthly payment to $150? You'll pay off full debt in five years. Moreover, you'll save about $6,000 in interest. Minimum payments aren't so good as it seems.

8. Legend: Retailers offer good credit cards. 

It's not so good. Carrying balance from one month to another is ball and chain. Rewards and interest-free financing can seem as a good deal, but if you carry a balance, things getting from bad to worse. You can get a retail card with resemble payment plans, where borrowers can shop from the retailer, then you can repay it in few months, interest-free. But what happens if you can't repay it in the schedule time? Mostly you have to pay a higher rate interest on the whole amount you originally charged. Let's take, for example card from Barclaycard US by using it you can purchase Apple products with up to 16 months interest-free. Sounds pretty good? But if you didn't repay debt in interest-free period here goes a huge annual percentage rate (about 22%) according to the information on the Apple website. It's no matter how excellent or horrible credit score you have. Even with ideal credit history you'll get about 20% of interest. Remember: there's always a fine print.

9. Legend: I can fix my credit score by using credit repair services. 

Nope. All the things repair company do, you can do by yourself. They can take your money and make no any real help for you. Sorry, but it's impossible to delete a piece of your credit history legally, it's also true for creating new profile with pure credit report. Be reasonable!

10. Legend: A lot of debt is equal to bankruptcy. 

Don't give up! You should consider all the opportunities, exits and solutions. Debt settlement or debt management can become good instruments. Debt settlement is trying to negotiate with your creditors to persuade them to redeem a part of your loan. You can highly reduce quantity of money that you need to repay by successful debt settlement. Debt management turns few loans into the one great loan. The new debt make your monthly bills lightly and usually lowers interest rate.

11. Legend: You can boost your credit score by closing unused credit lines or lowering credit limits. 

No, no and no. It can be harmful for your credit score, it only helps to reduce total debt load for irresponsive customers. If you made timely payments in the past, older profiles give you an advantage. Why? Because your FICO score consider when the credit line was opened. In such manner, you lose age advantage by closing an older account and your credit history looks doubtfully.

12. Legend: Rich people don't need federal student loans. 

Most well-being families don't even try to apply for federal aid, cause they think there is income cutoff to qualify. But they're wrong! There's no income cutoff to qualify for federal student loans. 41% of families with income about $100,000 didn't even fill out the FAFSA (Free Application for Federal Student Aid), which is necessary to get federal loans. Most lenders foster trying for federal loans, they don't get into account your income. As we talk about private loans they usually have variability of rising rates or high rates.

13.Legend: Joint accounts can be separated by divorce decree. 

It's not true. Joint accounts will stay connected after divorce, you may still see your ex-spouse bad credit practices in your credit report. That's right, if the decree states that your ex will bear liability for common accounts. If you want to preclude this situation, you should communicate with creditor for every joint account. May be it will be possible to delete one name from joint account and convert it into your private account. The other way you can solve this problem is close your account and create a new one.

14. Legend: Go into bankruptcy and never get credit again. 

Let's make it clear. Bankruptcy means that you had already corrupted your credit score, because of missed payments leading to the high quantity of debt. In this case bankruptcy can't make a lot of damage to your score. According to the data of Fair Isaac Corporation, if you have a starting score of 690, bankruptcy can lower it from 120 to 160 points. It's not exact calculation, no one can predict real impacts. It's possible to get a line for credit, even with low credit score. A lot of lenders don't take bankruptcy into account, while deciding what's worth to apply and what's not. Sometimes bankruptcy can free some money helping to repay your future debts. Furthermore, bankruptcy is not "everlasting destruction". It's mostly removed from your credit report after 6-10 years.

15. Legend: Pay off mortgage every month and your credit score will highly improve. 

On time payments doesn't have great influence on your credit score it's only prevent your credit score from cutting. Why? According to FICO's models, missed payments indicate you like a risky debtor more than regular payments.


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