5 Bad Credit Myths Debunked

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There is a lot of misinformation online regarding credit and credit scores. The age of anyone being able to access their credit score at any time, often free of charge, as well as the newfound popularity of credit monitoring apps, has rekindled the conversation about maintaining good credit. Below are five common bad credit myths debunked:

Bankruptcy Permanently Destroys Credit

To many people, bankruptcy can be an extremely intimidating term. Many are under the impression that bankruptcy is a last-resort option that permanently and negatively affects credit. The good news is that this myth is just that: a myth. When performed correctly, bankruptcy is a financial strategy a person can employ to start over.

While it is true that a bankruptcy can significantly lower a person’s score, it can also be a score saver. For example, if a person’s credit score is in the low 400s, there’s really not much lower a person can go. Wiping the debt in bankruptcy and then taking steps to improve credit through a secured card could raise a person’s credit faster than they could have, had they not filed for bankruptcy.

Checking Credit Report Lowers Score

A long-standing myth is that bad credit can be the result of a person checking their credit score. In reality, checking a credit score counts as a soft inquiry versus a hard inquiry, which is reserved for actual credit applications. A soft inquiry has no impact on a person’s credit score.

Credit Agencies Are the Only Way to Improve Credit

Overtime, credit reports are ridden with all sorts of dated or inaccurate information that could be harming a person’s score. Many turn to independent agencies to for help. Often, these agencies will do something that the person in debt could do themselves, and the result is a high cost for something that is technically free to do. Most credit issues can be resolved by the person in debt or, in more difficult cases, with the assistance of a bankruptcy attorney.

It Is Impossible to Get a Loan with Bad Credit

Having good credit when seeking a loan is certainly an advantage, but just because a person has poor credit, it doesn’t mean they can’t have a loan. Smaller institutions like credit unions, community banks, and lesser-known financial institutions may be more forgiving in their acceptance terms.

Paying Debts in Collections Removes Them From a Credit Report

One of the harshest myths people with bad credit confront everyday is fighting off collections. In the process of paying off accounts in collections, many believe that simply paying off their collections debts will have them removed from the credit report, thus resulting is a better credit rating. This is rarely the case and in fact, some may stay on the report longer.

Dealing with poor credit can be difficult – especially in the face of more intimidating options, like bankruptcy. But the process does not have to be intimidating. If you or a loved one is in New Jersey and has poor credit and considering bankruptcy, contact an experienced and knowledgeable attorney for help. Contact Joel Spivack today to schedule your consultation.

 

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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