Debt is a slippery slope. You need some of it to keep your credit report glowing, but not so much that you can’t make your monthly payments and spiral into a money pit from which no repayment plan can help you crawl out.
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Millions of Americans are in debt, whether it’s through student loans, car loans, personal loans, business loans, credit cards or other sources of high-interest debt. Given the state of everyone’s personal finances, you’d think they’d do a better job of separating myth from reality.
Sadly, that’s not the case, as many debt myths are still alive and well. Here’s a look at five myths that won’t help you deal with your debt.
Debt doesn’t necessarily hurt your credit score. In fact, taking on debt and managing it successfully can actually boost it. The goal is to pay your credit card bill each cycle on time (or early!) as this is the quickest way to improve your score.
For one thing, you need to establish a credit history to get a score to begin with, so some credit card debt can be a friend to your financial state. From there, your score can improve based on things like the length of your credit history, your payment history and your credit utilization ratio.
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There’s no question that building up unmanageable credit card balances is one of the biggest financial mistakes you can make, especially with high interest rates at stake.
However, if you manage credit cards wisely, they can be a tool to improve your finances in the form of bonus points and other perks. Your debt payments should work for you, not the other way around.
According to Natalia Brown, the chief compliance and consumer affairs officer at National Debt Relief, a provider of debt settlement and relief services, these perks are a great way to get discounts or cash back on everyday items.
The key to maximizing your credit card perks is being smart about how you use the cards. This means paying on time and never spending more than what can be paid off within a reasonable amount of time or in full by the due date.
This is a common myth that also happens to be wrong. Any financial expert will tell you that neither spouse is legally obligated to pay off debt that the other incurred before being married.
