Top Five Credit Misconceptions

The East Vally Tribune published a very informative article yesterday on the top five credit (and debt) misconceptions. According to the EVT (citing Transunion), the top five credit misconceptions are:

  1. Co-signing a loan doesn’t make you responsible for the account.
  2. Paying off a negative record will get it removed from your credit report.
  3. Paying off a debt will make your credit score jump 50 points right away.
  4. Checking your credit reports will lower your credit score.
  5. Closing old accounts will improve your credit score.

The co-signing part is the most controversial of the five becuase it oftentimes involves people you love and know. I talk to so many people who have co-signed for their brother, sister, son, daughter and sometimes friends. I know a level of compassion determines who you will co-sign for, but you need to be prudent. 

I suggest you do a type of credit check on your own. If the relative asking you to co-sign has had some serious money management problems in the past then you may want to stay away. However, if this is a one time situation where the person is in a jam, then you can consider doing something. This doesn’t mean there aren’t other ways of helping them besides co-signing.  I suggest looking into other avenues. It’s good to help, but you must be prudent.

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