Credit is one of those things that mystifies a lot of people. We hear a lot about credit reports and credit scores, but is all the advice we get “good” advice? Part of the problem is that there are so many “gurus” out there that tend to want to give you advice based on their agendas and motives instead of our best interest. Some of these pieces of advice are not just wrong, they’re downright harmful. Let’s look at three:
You Don’t Need A Credit Score, Since You Don’t Plan On Using Credit
This quote came directly off Dave Ramsey’s website. Here’s the thing… being debt free is great. That’s something that we should all strive for (at least until you can understand the difference between good debt and bad debt in wealth creation). Being debt free and using cash for everything is something that, in truth, is bad for your credit score. Mr. Ramsey is right in this. But to blanket say that you will never need credit again once you have no debt is not just wrong, it is harmful. Let me give you an example… One of my clients, who had been following the advice above for years and was debt free got into a car accident. He needed to rent a car. When he went to the car rental company, he was declined to rent a car because of no credit…even though the insurance company was paying the bill! If you can’t afford to pay cash for your home yet, according to the advice, you will need to rent until you can buy. Almost all rentals these days check your credit. It’s becoming harder and harder to get a good job without the company checking your credit. Credit is not just for buying things. It’s used today an indication of integrity and stability as well.
Use A Pre-Paid Debit Card To Improve Your Credit Score
This one comes from Suze Orman. I know, I know… there has been a lot going around about Ms. Orman lately, but tens of thousands of people bought into her scam about the “Approved Card” she was advertising. This is definitely one of those that is not only wrong, it’s extremely harmful. For those that haven’t followed, her Approved Card pre-paid debit card has been shut down and no longer exists. I have spoken with several people who still have not received their money back that was deposited on the card. Check out this site for a little more info. Here’s the problem with this advice: Debit cards are money you already have and are not credit extended to you. There is no reason whatsoever why they would be used as a part of your CREDIT score. Maybe Ms. Orman can come up with a debit score for us to use instead?
Just Order One of Your Credit Reports at a Time Because Credit Reports Are All The Same
Not true. In fact, one of the greatest indicators of credit fraud is a person with all three credit reports and scores the same. Equifax, Experian and TransUnion (the 3 major credit bureaus) use different systems for tracking information. As well, many creditors only report to one bureau, not all three, so it’s VERY likely that your reports will be different. So what do you do? Check all 3 reports. There are lots of sites offering free credit reports, but the only legitimate one that’s free is annualcreditreport.com.
For more information on credit and how to improve yours, you can get a copy of Amazing Credit. If you have a Kindle, the Kindle version is only $2.99. Click here for the Kindle copy. Feel free to email me for more help on credit or other financial issues.
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