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5 MYTHS ABOUT CREDIT AND DEBT

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This material was prepared for informational and/or educational purposes only.
The information contained herein has been obtained from sources we believe to be
reliable but is not guaranteed as to its accuracy or completeness.

Edelman Financial Engines, nor Financial Engines Advisors L.L.C., offer tax or
legal advice. Interested parties are strongly encouraged to seek advice from
qualified tax and/or legal experts regarding the best options for your
particular circumstances.

AM2080879

Whether it comes through a friend, a relative, or an ill-informed website, many
folks have the wrong information about credit and debt.





Here are five myths that many people share about credit and debt, according to
Money Management International, a nonprofit credit counseling agency. Let’s set
the record straight on each of them:
 
There Is an Easy Way to Fix Bad Credit 
Wrong. Some TV and radio ads claim their sponsors can “fix” or somehow improve
your credit report in a few easy steps. The truth is that no person or company
can remove accurate entries from your credit report. The Fair Credit Reporting
Act says that information about a delinquent account (late payments,
nonpayments) can remain on your file with the credit reporting agencies for
seven years, starting 180 days after the account becomes delinquent.
If you do need help managing your debt, make sure to enlist the help of a
legitimate firm. You can find a list of legitimate, government-approved credit
counseling organizations, by visiting usdoj.gov/ust.

 
Bankruptcy Discharges All Debts
This is simply not true. A number of debts don’t go away through bankruptcy,
including back taxes less than three years old, student loans, child support and
debts incurred through fraud.

 
Debt Collectors Can’t Call Others About Your Debts
As unfair as it may seem, they can. The Fair Debt Collection Practices Act
allows debt collectors to make such calls, but there are a few restrictions:
They can call others only to find out where you live, your telephone number and
where you work. They can’t reveal the reason for the call to anyone other than
you or your attorney. And unless you tell them otherwise, they can call you at
work.

 
A Divorce Decree Matters to Creditors
Again, that’s wrong. A divorce decree is between you and your ex-spouse; the
creditors are not involved. While the decree may state how your assets and debts
will be divided, the creditors were not involved in the settlement and had no
input in the results. Therefore, the decree doesn’t change any contracts with
them. Whoever signed the contract with them is still obligated to pay the debt,
regardless of the divorce or its decree. If payments are not made, the creditors
can sue the debtor and file the negative information with the credit agencies.

 
Your Credit Card Company Can’t Change Your Interest Rate
According to the Credit CARD Act of 2009, card issuers can indeed make key
contract changes to your account terms and agreement, including rate increases,
with 45 days’ notice. Many will raise your interest rates if your credit score
declines — even if you have paid on time and according to the terms of your
contract.

 
These are a few examples of misinformation about credit and debt. There are
similar myths about workplace retirement plans, Social Security, college loans,
mortgages, car loans and a host of other topics.
Before you act on what you “know,” make sure to check with a trusted financial
advisor. They can make sure you’re acting on valid information, not inaccurate
assumptions.















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