Top Five Myths of Debt Management
There are a wide variety of myths associated with what to do and what not to do about improving your debt structure. Debt management solutions agencies clear the myths associated with debt management.
Debt management myths
Rumors related to credit scores and debt management strategies can be confusing. It is a catch-22 situation where you have no idea whether to act based on myths or stick to your debt payoff tactics. Experts of debt management solutions have outlined the top five myths and the ways to tackle them.
Closing old accounts improves credit score
If you are dealing with debt problems, you must have encountered this suggestion from friends and family. So if the same suggestion from various sources makes you contemplate whether to close accounts or not, here is the fact. According to debt management experts, closing old accounts will not improve your credit score; rather it will have the opposite effect. If you cancel your old credit account, your credit history will appear shorter. As a result, your credit score will be lowered. You can opt to close a new account if you are set on reducing your credit levels.
Paying off debt adds 50 points to your credit score
There is no such magical formula to add up your credit score. There are several factors which are taken into account to derive the credit score. If you have a high credit score, even one non-payment or late payment of debt can cause the score to drop significantly. However, the case is not the same for low credit score holders. Debt management experts suggest paying bills on time and taking care not to have a bad credit report will automatically bring positive points for your credit score.
Negative payoff record gets removed from credit report
It’s a common misconception that once you pay off your collection accounts or declare bankruptcy, the charges will be removed from your credit report. Even if you have paid everything off, they remain in the credit report for a period of 7-10 years. The only change you notice is they will be marked as “paid.”
Soft inquiry can harm your credit
This is considered a false debt management myth. Checking your credit report doesn’t affect your credit score in any way. Rather it is your right to know your credit status. Just take care not to make multiple hard inquiries within a short time interval as it might irritate your creditors.
Co-signer is not accountable
As a co-signer of any loan, you have certain legal responsibilities towards the credit amount. Any good or bad credit interest for this loan will show up on yours as well as the account holders’ credit reports.
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