NEW YORK (MainStreet) Credit reports and the three-digit scores that come out of them are still things shrouded in mystery for many people. Even many consumers with basic financial literacy believe many of the common myths about credit making the rounds. In fact, we'd be amazed if you made it to the end of the article without seeing a credit myth that you believe in.
Squaring Up Removes Negative Reporting
As the vice president of consumer education at Experian, one of the three major credit reporting bureaus in the United States, Maxine Sweet knows what's what when it comes to credit myths. One of the biggest? Getting square with a collector will remove negative information from your credit.
"It will bring the account current, meaning that you're getting positive points to offset the negative," she said. However, the negatives don't go away.
Not Using Credit Has No Consequences
Sweet further hears from a lot of consumers who think that the response to having bad credit is not to use any credit at all. She describes this as "the worst mistake someone can make.""If you can't control yourself and you're just going to spend more than you can afford, don't have credit," she said. "But if you can manage to just use credit for things you use a lot like groceries and gas, you're going to add positives to your credit history each month."
Erik Larson, the CEO of NextAdvisor.com, concurs. "If you don't have credit cards, that's going to hurt your score," he said. Having no credit is only slightly better than having bad credit.
Spousal Credit Reports
Larson is surprised how many people still believe that they have a joint credit report with their spouse. "Everyone has a separate credit report, he said. "You have joint accounts and those show up on each of your scores, but the actual credit report is different."