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Debunking Finance-Related Urban Legends
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For more information contact:
Kelly Rote (713) 394-3201 |
Release Date: February 24, 2005 |
HOUSTON (February 23, 2005)— Unfortunately for consumers, there is no limit to the number of scams, fraud, and misconceptions related to credit. However, you cannot believe everything you see and hear these days when it comes to credit. As the nation’s largest full service non-profit credit counseling agency, Money Management International (MMI) has come across some myths about credit that are humorous, odd and downright bizarre. The following are MMI’s top ten urban legends related to personal finance:
Myth #1: If a check is written in red ink, it takes longer to be scanned by the bank’s equipment and the check will be delayed in clearing, giving you access to your money for a longer period of time.
Fact: The color of ink you use to write checks has nothing to do with the processing time. And with the recent Check 21 legislation, checks can clear the same day they are written.
Myth #2: If you send a creditor any payment, such as only $5.00, the creditor won’t consider you delinquent.
Fact: You must make the minimum monthly payment required by the creditor in order to avoid penalties.
Myth #3: Luxurious vacation packages are available at bargain-basement prices, simply by calling a travel club and supplying your credit card number to the voice on the other end of the phone.
Fact: Many times these “too good to be true” offers truly are just that. Charges you didn’t make could suddenly be added to your bill and the trip might not be a reality.
Myth #4: It is safe to give your credit card information to people who call to verify your account number.
Fact: Never give any personal or account information out to someone over the phone unless you initiated the call.
Myth #5: A creditor cannot raise the interest rate on your fixed rate loan.
Fact: It is now common for creditors to raise interest rates based on a consumer’s creditworthiness because of the Universal Default clause.
Myth #6: As a cosigner, you are just a “back up.” Creditors exhaust every means of collecting from the primary borrower before they come after a cosigner.
Fact: Studies show that 75 percent of the time, the creditor approaches the cosigner for payment, because they seek payment from the person who offers the best chance of repaying the debt.
Myth #7: If a payment to a creditor is just one day late, you are not considered delinquent.
Fact: While most creditors do not file a negative report with a credit rating agency until you have exceeded your due date by 30-days, it is important for you to find out how your creditors report late payments.
Myth #8: A creditor cannot call anyone else, such as friends or relatives, to ask about your debt.
Fact: A collector is permitted to contact others to find out where you live, what your phone number is and where you work. It is best to reach out to a creditor or a reputable credit counseling agency to explain your individual circumstances before creditors contact you or your family members.
Myth #9: If you show your creditors a divorce decree that indicates your ex-spouse is responsible for paying the debt, you no longer are liable for the debt owed on your accounts.
Fact: Whoever is signed on the original contract with the creditor, whether it is you or your spouse, will still be obligated to repay the debt after a divorce. Thus, you are still liable on these debts and the creditors can report the status of these accounts on your credit bureau file.
Myth #10: If you try to make a partial payment to a creditor and they refuse to accept the payment, then you no longer owe the creditor.
Fact: Creditors are not required to accept "good faith" payments if the payment is not sufficient to bring the account current.
“It is important to consider the information source, particularly when it relates to your finances,” said Cate Williams, vice president of financial literacy for MMI. “Ask your creditors important questions or contact a reputable credit counseling agency, such as MMI, when you encounter information of which you are unsure. It is better to be over informed than misinformed.”
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Money Management International, is a non-profit community service organization that provides confidential financial guidance, counseling and debt management assistance to consumers. MMI helps consumers trim their expenses, develop a workable budget, lower their debt payments and repay debts. Services are available by phone. To visit with an MMI counselor, call toll-free 1-800-762-2271- 24 hours a day, 7 days a week. Spanish speaking counselors are available. Consumers can also learn more by visiting the MMI home page at www.moneymanagement.org.
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