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10
Greatest Myths about Credit and Debt
by STEVE RHODES and
MIKE KIDWELL
Myth
1: If I don't use credit, I'll never be able to buy anything.
Reality: If you don't use credit, you won't have debt. Remember when
people used to pay for purchases in cash? If you want something bad
enough, save for it. It is significantly more rewarding to purchase
something and own it outright than to create another liability.
Myth
2: Credit is bad.
Reality: Wrong. Credit can be used for many good and worthwhile purposes,
such as buying a home. Credit cards are very convenient when making
purchases as long as you have the money to pay off the credit card bill.
Credit is like many other things in life: When used incorrectly, it can
hurt you.
Professional PSD to HTML/CSS Conversion Service. PSD to HTML conversion can sometimes be a complex job. You get a lot of options for various things rather than having to suffice with anything less than the highest standards. Myth
3: I'm a loser and a failure because I'm in financial trouble.
Reality: You have to accept responsibility for your actions and remember
that you did accept the credit with the promise of paying it back. But
most families and our schools do a poor job of teaching financial
responsibility. How many classes did you take while growing up that taught
you how much credit you should accept? Maybe the truth is that you made a
mistake and got in over your head because you didn't know better. If you
can learn from this mistake, you are neither a loser nor a failure. Accept
your setback, learn from it, and move on.
Myth
4: If my debts get to be too much, I'll just file for bankruptcy.
Reality: Bankruptcy is a very serious matter and should be a last resort,
not an easy out. It is a legal case filed with the bankruptcy court that
is a matter of public record, and it can be reported for the rest of your
life if you apply for certain loans, life insurance or jobs. Many people
who have filed bankruptcy wish they had tried other alternatives before
filing. Once you file, you will always be ''a person who filed
bankruptcy,'' and you can never take that back.
Myth
5: The credit card companies wouldn't send me applications in the mail if
I couldn't afford it.
Reality: Wrong. The credit card companies are simply making you an offer
based on mailing lists or research they have performed. It is your
responsibility to determine whether you can afford to accept their offer.
Myth
6: Everything is okay because I pay the minimum payment due each month.
Reality: By just paying the minimum payment on a debt, you extend your
payments for many years. If possible, send more than the minimum payment.
If that isn't possible, you are probably living close to the financial
edge. What would happen if you were injured or sick or could not work?
Simply being able to live from paycheck to paycheck is not a sign of
financial well-being.
Myth
7: I can wrap up all of my credit card debt into a home equity loan and
my interest will be tax deductible.
Reality: You have just placed your home at risk and could lose it if you
fail to make your payments. Nobody ever plans not to be able to make her
payments. The reason the lender uses your home as collateral is so she
can take it from you if you default on the loan. As for the tax
deduction, who knows whether the interest will be deductible for the
life of the loan? Credit card interest used to be deductible but no
longer is. Are you confident that home equity interest will always be
deductible?
Myth
8: It's okay if I take a cash advance to keep me from falling behind on
my payments.
Reality: Some people take cash advances on their credit cards to pay their
other creditors ''on time.'' It is better to accept a late payment than
to borrow your way deeper into debt, just to pay for bills you can't
afford.
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Myth 9: If I cosign a loan, the lender will never come after
me.
Reality: You cosigned for the loan, which means you promised
to repay the debt if the borrower couldn't. When the
borrower is unable to pay back the loan, you are on the
hook. Unless you are prepared to repay the loan when the
borrower defaults, you should never cosign any loan.
Myth
10: My financial condition is so bad that my situation is hopeless.
Reality: Although your problem may not be solved in a way that you would
envision, a resolution can always be found. Open your mind and be
realistic about your options. Ultimately, you have to choose a solution
you are most comfortable with.
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What often happens is you put yourself so deep in debt that it is
nearly impossible to improve your situation without
significant negative marks being made on your credit report.
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