Talk Wealth to Me

#063 Consumer Credit: Myths vs. Reality

November 13, 2020 Felipe Arevalo, Chase Peckham, Katie Utterback Season 3 Episode 12
Talk Wealth to Me
#063 Consumer Credit: Myths vs. Reality
Show Notes Transcript

Working in the personal finance industry and providing education to others has shown us that there are topics that are regularly missed or misunderstood. Often we can predict the questions people are going to ask before the words even leave their mouths. No more so than in the world of consumer credit. The famous - or infamous, depending on how you look at it - credit report and its close cousin, the credit score. There are many myths that never seem to escape financial misinformation lore.

In this episode, Chase and Felipe discuss the most common myths and bring them full circle to reality. Some are total myths and some are half-truths, but we cover them all!

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Speaker 1:

Welcome to Talk Wealth to Me, a safe space podcast, where we chat about anything and everything related to personal finance, the information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal tax or other professional advice.

Chase Peckham:

Hello, and welcome to another edition of Talk Wealth to Me, you know, today's episode is unique and a little bit different in the fact that , uh , Felipe and I come across so many questions when we do all the presentations we do in personal finance, literally thousands of them and the things that keep coming up over and over and over again, no matter how much things changed through the years are the myths versus the reality of credit scores and credit reports. And it's almost comical in the fact that generation after generation keep getting the same misinformation. So here it is, those myths versus reality. It was a great show this morning. And so much of what we do, Phil is presentations . And in COVID land, we have found ourselves where we're doing so many of these virtual presentations. Uh, and , and we forget sometimes that there are so many questions out there. And one thing that brought back to light, which when we're doing our in-person presentations in front of a large crowd, and we've been doing this, what for, for years? I mean, I'm , I'm, well, I'm over like almost 11 years now. Um, you're right there behind me and together done thousands and thousands of presentations and credit scores and credit report myths are like a constant. They never go away. You think that eventually it's the same thing over and over and over again.

Felipe Arevalo:

It's the same ones.

Chase Peckham:

And we keep hearing it and we have this smile on our face and , and we go, well , here we get to explain this again. I mean, we've probably explained and , and tried to debunk myths , uh , well over a thousand times and realized man, so many people think the same things.

Felipe Arevalo:

Oh yeah. It's when we do these presentations, especially when we'd get to do them in person. Um, which I know we're both missing when we everyone's missing doing everything in person these days.

Chase Peckham:

For sure.

:

But , uh, you know, it, you can almost make a list of the questions that you're going to get because you get a lot of the similar questions and you get a lot of the similar misconceptions , uh, with people who, different groups, different parts of the County, different age groups, different, it's all different, but it's the same handful of questions every once in a while you get a unique question that you don't hear all the time and, you know, you just got to pause and say, Whoa ,

Chase Peckham:

I have to ponder that for a second.

Felipe Arevalo:

I like a question where it's like, well, let me, let me find that out for you because it doesn't, you get the same ones

Chase Peckham:

Doesn't happen very often. That's for sure. It's, it's so funny because you're right. There are , you know, we expect young people to have these same questions, right. But it's the same misinformation that gets handed down to them over and over again, whether it be from a, you know, a grandparent or a parent or a friend. I mean, you, you mentioned earlier that there's these commercials, right? They where the person throws this , they're sitting on a bench and his friend throws his phone into the water. Cause he's trying to protect him from looking up his own credit score. That's funny stuff, but it's accurate.

Felipe Arevalo:

Yeah. I think because there is, you know, friends who might look at you and say, wait , you did what you checked your credit report today. Why ? And it's like, you know, because there's errors on your credit report sometimes, you know, but, and there's , well that could hurt your score. No, well sit down and let me, let me explain this to you real quick, because it is one of the big misconceptions. And as funny as the commercials are there , they're telling the truth in this case, you know, and it's something that we just it's the same, same ones we see all the time.

Chase Peckham:

It was over this discussion earlier that we did at one of our Smart With Your Money LIVE. And we're like, man, you know , this is something that comes up enough to where we need to put it on the podcast and have the discussion and talk about the biggest myths and misconceptions. The myths versus reality is really on what you can do with your credit reports and credit scores. Those, those so many misconceptions of what the credit score and credit report are all about.

Felipe Arevalo:

Myth. Number one, when I pay off a past due accounts, such as I charge off or a collection account, it will show as paid and no longer being negative.

Chase Peckham:

This is a goodie . We do get this one a lot. And the answer is, eh , right. No, it's not true, but there is a little bit of truth to it, which is funny. Cause we'll run into this quite a bit, but it's really over and over again. We're going to talk about how really it's, how is the question asked or how is it, how is the sentence structured? Uh, whether it is it's true or not true. Uh , but in this case, when it, when you're talking about a past due account , uh, you're talking about a charge off account and let's say you pay it off and it's now going to show paid. That doesn't mean it's no longer negative. It's not as negative as it would be prior to that, if it still had money owed on it and it was still delinquent, then it would be super negative. But if you're in a collections account or a charge off account, which is the , basically the same thing, it's going to be negative, whether you've paid it off or not,

Felipe Arevalo:

Right. Just the fact that the pay it doesn't race , the fact that it was there , uh , for the most part, you know, and again, it will look better that you don't still owe the money, but it's something where, you know, just paying it off is not going to increase your score. And it's not going to remove that negative now with time. Yes. Uh , as things get older and older on your credit report, they will affect you less and less. And after seven years that falls off and then you don't have to, you know, then it's completely gone, but just paying it off. Isn't what makes it , uh, it doesn't just erase the fact that it was there. Now, the exception we mentioned is if , if you do have a collections account and part of the negotiation process with that collection agency is to, you know, you can ask and have that be part of the negotiating where they can remove that collection account off your credit report. Now, now we're talking a whole different story because that account can be paid off. And if they go ahead and remove it now, per whatever agreement you guys came up with now,

Chase Peckham:

Now It's gone.

Felipe Arevalo:

It's like, it just wasn't there. Right ? And then yes , you've in fact removed it , the negative effect from your score

Chase Peckham:

Without question. And you should, you know, it's funny, it's such a tricky area when it comes to paying collection accounts, because, you know, as, as we've all talked about and we've known that collection accounts are bought for pennies on the dollar from the original creditor most times, and yet they're trying to get all of the payment. I mean, think about the return on investment, right? If you, if you've paid, you know, 30 cents on the dollar and you're gonna get a hundred cents, you're going to get a full dollar on the dollar, then you've made 70%, right? I mean, that's a pretty good return. So of course, they're going to try to do that. But in reality, for us, the consumer, if you're in a collections account, you should know right away, or at least find out, do your homework, that they're going, they want to get something back. They don't want to lose out. They , they did put some money down for that. So they're gonna , they're going to negotiate with you if, if need be now, remember we're talking about collection accounts, not real accounts, right? So it is something that , that you can and should remember because you should be selective when paying off those old debts. I mean, depending on how old it is , uh, how much you owe is, is something you should look into. And really, if you're just trying to finance a home or you're trying to buy a car and you need to pay off old debts, now that's a different ball game. But if you've got time, you should extreme, you should really proceed with caution. Uh, and because paying off an old debt that is due to retire, right? And what I mean by that is the statute of limitations within your state to recover that debt might be, might be coming up soon and you may not own that. They won't be able to collect it. And if it's passed already, for sure. And if you decide to make any kind of payments or acknowledged that, that debt's yours, it could re age the account so that you really want to be careful.

Felipe Arevalo:

You also be careful it's about if it's about to fall off your credit report. If you're, you know, a few months from the seven year Mark, it's about to fall off, you pay it. You're back to square one, as far as time goes. Uh , so at that, at that point, you, you may have done more damage than good to your credit report. If it was about to fall off in another month or two, and then it was going to be like, it never happened, whether you paid it or not, you know, you definitely want to keep that in mind when it comes to credit.

Chase Peckham:

Exactly. So again , uh, paying off a past due account, paying on that is, is not going to all of a sudden, no longer be negative.

Felipe Arevalo:

So next one is the credit bureaus are a branch of the government and the records are infallible.

Chase Peckham:

Oh, this is a good one. And this is something that comes up quite a bit. A lot of people misconceive the fact that the credit bureaus are government entities and they are anything but government entities, right? They are publicly traded for profit companies. They are marketing companies, right. They sell information to organizations about us financially, so they can determine who is a good fit for their products, who they can market to the reason that we all get an incredibly large amount of junk mail in our mailboxes.

Felipe Arevalo:

Yeah. And it's something where , um, you , you, there are guidelines that they have to follow.

Chase Peckham:

Of course they are regulated for sure.

Felipe Arevalo:

They're regulated, but they're, they're their own companies. And, and like you said, they're, they're out to make a profit. It's a business. So , uh , now are the records are, are they verifying every single piece of information that comes their way no they're not verifying that information.

Chase Peckham:

Only when asked to.

Felipe Arevalo:

Yeah. You have to initiate the fact that, Hey, you know, go check because this doesn't belong to me at that point, then yeah. They will reach out and try and verify that. But if you go along the way and you're just kind of never checking your credit report, they're not going to take the time to check the validity of every single note in any, every single person's report. That responsibility falls on us as consumers to, you know, go ahead and , uh, find those errors, identify them and then request for them to be reviewed.

Chase Peckham:

Yeah. I mean, unfortunately for us, right? We didn't ask to have credit reports. We didn't ask to have credit profiles. It does benefit us in some ways, if we have great credit, right? Because we get lower interest rates and we can get better deals and sometimes 0% on cars and that kind of thing. But we didn't ask for it. It's not like we went out and signed up for this thing and now we're responsible for it. But yet there it is are because they weren't necessarily , they're not built for us. They were built for organizations to be able to find out information about us, to give us loans, right. To sell us things. And I mean, think about it this way. If we were to think about it simply you wouldn't just loan somebody off the street money that you don't know. Right. If somebody came up to you and said, Hey, can I borrow a hundred dollars? You're going to look them like, look at them. Like, they're crazy. I don't know you. I w how would I just give you a hundred dollars? I mean, maybe because I'm just a nice person and , but I'm not expecting that to be paid back, but if I was expecting to be paid back, when you want to do your homework.

Felipe Arevalo:

Yeah, absolutely.

Chase Peckham:

Wouldn't you want to know,

Felipe Arevalo:

And you would, you would want to know that. If, if it's like a , uh, somewhat of an acquaintance you might ask around and ask your friends and, you know, figure out if they've borrowed money from them and , and get their payment history , um , you know, from, from other individuals. And this is just a way for banks, credit unions and lenders to go in and check and see what your payment history is to all the other lenders. Um, you know , so it's, it's there, and , and there are errors on, on people's credit reports. It happens

Chase Peckham:

Absolutely. 79% is like a number that is out there around 80% that independent at an independent research group revealed it that literally, you know, there's that many errors on. People's what, I mean, we're talking in the millions and millions and millions of records. I mean, how could they possibly make sure that all that information is correct? They can't, they just put , it

Felipe Arevalo:

Some errors might be minor, but there could be very drastic, very damaging errors on your credit report.

Chase Peckham:

Especially if you have a common name, it's not necessarily identity theft eater either. Right .

Felipe Arevalo:

Right. It can be just error. Uh, you know, how many, you have a very common name, those Sarah's of the world, or the know those very common first and last name combinations,

Chase Peckham:

Like Mike.

Felipe Arevalo:

Yeah Mike, David, that kind of thing. They , you know, if you think about it , like, man, how many do I know? I know a lot of them, you know, so it's something where , um , if you have a common name or if you share a name with many members of your family , uh, you definitely want to go ahead and, you know ,

Chase Peckham:

I have that issue trust me.

Felipe Arevalo:

Take a look at that because I share a last name with my grandpa's or first and last name combination with my grandpa. So I have to, you know, make sure that any of his, he's not much of a credit user, but , um, but it's still, it's something where, you know, you look at and you're like, Hey grandpa, did you, do you miss one of those , uh , medical bill payments? Because you know how they give you like a list of, when you go to the doctor, you might get like a list of, you know , 50 different things for one little visit. Um, you know, so, but you just have to stay on top of it.

Chase Peckham:

For sure mean. And not only that, I mean, but you also, it could just be outdated information. It should be, it could be stuff that can fall off. Uh, it could be stuff that wasn't supposed to be there in the first place. And, you know, because it's older than heck. And so you'd just get it, you know , removed. I mean, Phil, it's funny. I got addresses on my credit reports that go as far back as college. And trust me, I'm no where near college age anymore, nowhere near. I know, I know you find that hard to believe, but nowhere close and yet you can find two or three different addresses. And it also is funny because I lived in a lot of different places. It seems,

Felipe Arevalo:

You know , I believe it, because I was just going to say an example, like, what if you made a mistake in college and college is more than seven years away. Um, then that mistake that you made in college should have fallen off your credit

Chase Peckham:

And addresses. Aren't going to affect your credit scores. It doesn't have anything to do with that. But I mean, a lot of times it's like, who cares? That , that information, it's just comedy to me that that's still there. Yeah.

Felipe Arevalo:

The only thing that could be troublesome is if you're asked to verify your identity, because when you do pull your credit report , some it does have some security questions. If you forgot about one, and then you're clicking through, and it says, which one of these streets have you not lived on or something along those lines. And you click the wrong one because you forgot about an address you lived in for half a semester in college. Uh, you might get the questions wrong, and then you'll have to verify your identity to get your credit report. That's the only time that, but not a big deal as far as , uh , credit reports go,

Chase Peckham:

Absolutely . Another one of the big myths Phil it that we get quite a bit, or are the large things, right? Remember those things that are definitely negatives on your credit report, if you have them things like bankruptcies or foreclosures or tax liens, that all of these things have to be put on your credit report. When if you, if you happen to go through that, and they're impossible to remove from your credit report and the honest truth is that's not true at all. There's no law that says that anything has to be put on your credit report. Even if you go through something as big as that now are the chances are that it's going to be. Yeah, I would say it's a pretty good chance, but there's no law that says that it has to be

Felipe Arevalo:

Right. It's like some things they don't have to be, but you're pretty sure they're going to make it on there.

Chase Peckham:

Most of the time when it's negative.

Felipe Arevalo:

Student loan. You take out a student loan with the department of education. They're probably going to make, you know , they don't have to be, but they're probably going to end up on all three of your credit reports.

Chase Peckham:

Right. You might be one of the lucky ones and it just gets slips through the cracks.

Felipe Arevalo:

Yeah slips through.

Chase Peckham:

But that doesn't happen very, very, very often quite at all,

Felipe Arevalo:

No not at all.

Chase Peckham:

But it is something to be there. But just again, we want to reiterate to everyone that there is no law that dictates that something has to be put on your credit report or , uh, can be left off right. There really isn't. If there's a transaction, if there's an account, they can put the positive information or negative information if they want to.

Felipe Arevalo:

For sure. All right , let's go onto the next one. Um , and this is when we get a lot and sometimes people say, well , you didn't answer the question when , when we get asked this in classrooms and it's because you can't, it's not that I sidestep the question because I didn't want to answer it . It's because you don't always know the whole picture. So there's no way for you to say, and this one is closing an account will help your credit score. And that's , that would be a no , um, you know, closing the account more of could have a potentially negative. Now how much of a negative , uh, or how much is that going to move the needle on your credit score well depends.

Chase Peckham:

Right.

Felipe Arevalo:

And people don't like that answer. Usually when they, when they give you a hypothetical, hypothetically, I have six accounts and I close one what's that gonna do to my credit score?

Chase Peckham:

Impossible to answer.

Felipe Arevalo:

I don't know, one , I don't know what your credit score is. Two . I don't know anything else about you, except you're telling me about these accounts. You know, so it's something where closing an account. What that can do is it can change your debt to credit ratio. And that's where it would actually, if you're carrying any kind of debt, have a negative effect on your , uh , credit score, because now you've increased your debt to credit ratio. And if you increase that percentage, you know, that's the second biggest factor to a FICO score. So now you're looking at potentially negative information.

Chase Peckham:

For sure.

Felipe Arevalo:

Now.

Chase Peckham:

Especially if you have low or low limits, right, and you don't have a total lot of available credit to you and you shut one of two or three credit cards down, that's going to have a significant effect

Felipe Arevalo:

Right now, if you have, you know, you mentioned, like you mentioned earlier, you have a card from if you had a card from college days, and that was, you know, a while ago. And since then you've opened up other cards, you've paid off cars, you have a house you've been paying your mortgage, you paid off your student loans.

Chase Peckham:

You have a long history.

Felipe Arevalo:

and you close off this thousand dollar credit card that you got , uh , you know, back in college, it may not do much to your credit. Uh , you know, because it , especially if you have no other, you know, balance on your cards and you have so much available credit limit, long histories attached to it, that $1,000 card that you got in college that you don't use anymore, you know , is probably not gonna hurt you.

Chase Peckham:

It'll be a blip on the screen when you barely noticed it. I mean, if you have eight or nine credit cards and you don't need that many, and eventually if you're not using some, right, if, if , if you're having credit cards that are sitting there lying dormant, eventually you're that credit grantor is going to come out and close it for you. Anyway, they don't need available credit out there. That's not doing anything. So it's better, It honestly looks better on your credit if you closed it versus the credit grantor , uh , so to speak the, the bank or , uh , the financier that, that gave you that credit card , um, or supplied you that credit card, that is something that you do want to take into consideration. But really, I mean, if you have two or three credit cards and your , you know, don't, don't close that just, but you don't have to go into debt either. Right? We hear that from people a lot though, they'll go into debt because they want to improve their credit score. I mean, that , that is the most backward thing in the world. You can do. I would never, in a million years tell anybody to go out and buy a car because they want to start building the credit. That is no, right. There is no reason to do that. If you have a card that you're not using very much, it's old , use it for one thing. You want to build your credit up better. You want to just use it to keep that fresh, use it, to pay you to pay your credit card bill, and then like you would pay your credit card bill directly, or your cell phone, right? Excuse me, your cell phone. That's a good one. Um , I got tongue tied there for a second. Use that

Felipe Arevalo:

Or Netflix, Netflix went up a couple more dollars.

Chase Peckham:

Something that you would pay for regularly monthly, just do that and then pay it off on the credit card because you don't get brownie points for paying off extra debt. You really don't. Um, unless of , especially if it's not sitting there and on your balance and, and building on , uh , um , interest, there's no reason to do it.

Felipe Arevalo:

Yeah . And we've had people, you know, from time to time say, you know , Hey, I got declined for a credit card. I think because I already have too much credit. I'm going to go close one and try again. And, and then you have to stop and say, no , no, no, please don't do that because that's not going to work out in your favor. You know, closing that card today and going in and asking for another one tomorrow, it's not the right approach. No , that's not going to work out. And that's not good

Chase Peckham:

If you're getting declined There are things far beyond that.

Felipe Arevalo:

Right. And in closing an account's not going to give you like a instantaneous credit boost to go get more credit.

Chase Peckham:

One hundred percent.

Felipe Arevalo:

It doesn't work that way.

Chase Peckham:

A hundred percent. Don't close that account,

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Right. At least not with the purpose of acquire of increasing your score.

Chase Peckham:

Right if you have a lot of accounts that , you know , that's something to think about?

Felipe Arevalo:

Yeah. Uh , another one we get, if, if I build enough good credit, it will instantaneously offset my bad credit and make me credit worthy . And , and first of all, the , the term, if I build up enough, if I build up good credit and it's important to take an account, you know, and this happens sometimes where like, you know, people come up to us and they say, okay, so I just got a credit card and I paid it on time and now I should have good credit. Right. Yeah. By By. Just got a credit card. Do you mean recently? Oh yeah. A couple months ago. Yeah . Building good credit takes time. Uh, so, so the fact that you've put some good credit on your credit history, it doesn't automatically , uh, offset and eliminate any negatives that took place beforehand.

Chase Peckham:

Hundred percent.

Felipe Arevalo:

With time, you continue to build enough good credit, that negative, whatever it was, whether it's missed payments or things that went to collections or, or, you know, whatever that it starts to get older and older, and it starts to have less and less of a negative effect on your score. So yeah, if the, with time, if you build enough credit, good credit and good credit history, you can eliminate, you know, we talked to people all the time, just because you've made a mistake with your credit doesn't mean that you can't still someday have great credit. It just means it probably won't happen tomorrow. You can fix , uh, a messed up credit score. If your credit score is not where you want it to be, you can get it to where you want it and need it. Uh , it just gonna take, it's gonna take effort. It's gonna take time and it's just, don't expect, you know, with credit scores going up, it's a slow, steady climb. Unfortunately, it's, it's quite the roller coaster. When your credit score goes down, it can go down with a quickness.

Chase Peckham:

For sure .

Felipe Arevalo:

So it is important.

Chase Peckham:

Just miss a few payments.

Felipe Arevalo:

To keep that yeah, miss a couple payments and there goes your credit score.

Chase Peckham:

Actually miss one. Go , go a full 30 days and , and be delinquent on that. That's, that's a big ding, especially if you have good credit, the better credit you have, the harder you're going to fall, believe it or not.

Felipe Arevalo:

Yeah. Yeah. And it's something where, you know, it's just that one, but you can't just make a one or two positive payments after that and say, okay, you see, I can do it again. And I hope your score to rebound. It doesn't really work that way. Unfortunately.

Chase Peckham:

Absolutely. Um, you know, feel , I think this is the humdinger of all of the, these misconceptions that we hear all the time. I mean, literally on a daily basis, we get this and it's a common, common, common question that if I check my own credit score or I look at my own credit report, my credit rating is going to go down. It's going to hurt my score. I don't think there is anything farther from the truth.

Felipe Arevalo:

Oh, I agree. And, but, and we recommend people check their credit reports often. Uh, so you can check your, your credit score , uh, not your score, your credit report. Um, you know, really as many times as you want. And as long as you're the one checking it, then you're not gonna see, you know, your credit score, take a, take a hit in any way. You, you may see a noted on your credit report, but it won't go to when your credit report is used to create credit scores or sent off to lenders. That information doesn't go. So, so that just, you know , it doesn't help or hurt, you know, any time you pull your

Chase Peckham:

Right, it's really just for you to know. I mean, you're basically, you can look back as far as two years and see how many times that you've checked your score or checked your credit report. So that's something that you need, you know , you can take into consideration. And not only that, the technical term that you're going to hear here, and you may not know what they are, is inquiry. Uh , and there are what you would call a soft inquiry, which you referred to and a hard inquiry and the soft inquiry can happen. A number of ways you looking at your own, but also , uh , there are organizations and companies, again, we mentioned at the beginning that this they're marketing companies, right? So they're going to be organizations looking up your information because they want to market to you. They want to sell you their products , uh, whether you're subprime in that area, or you're like , you've got great credit and they want to give you the opportunity to refi a bunch of stuff. It really just depends. Right. But they, they look at , you can look at, look back as far as three years and look and see all the different companies that are looking at your credit just for marketing purposes. And it has absolutely nothing to do with your credit score.

Felipe Arevalo:

Yeah. And it's sometimes, you know, I remember in college that was kind of looking like, wow , look who thinks that I might be a good a candidate for, you know, for a credit card or something along those lines. And I think that's how they have you ever think about it? Like you go out , uh, so you go out and buy a car or , or you go out, you know, just car shopping. Maybe you don't even buy the car , but you applied to see what car loan, what your car loan may look like. All of a sudden you're going to start receiving ,

Chase Peckham:

Right.

Felipe Arevalo:

Things in the mail that say, Hey, we have car loans, great car loan deals.

Chase Peckham:

It's like you're a little late.

Felipe Arevalo:

Exactly. When I got my car for months afterwards, I've been receiving a , from this bank, ABC, Hey, we have car loans. Hey, would you like to, you know, along with all the spam calls about your vehicles, extended warranty,

Chase Peckham:

Oh my God. I'm still getting them and my car is a year old. Oh geez .

Felipe Arevalo:

But, but you get all that information from the, the from all the other lenders, because all of a sudden, there's a record of you applying for a car loan and they're marketing to, you know , people who maybe have applied to a Car loan. They should probably add another filter and remove people who actually got a car loan.

Chase Peckham:

Right.

Felipe Arevalo:

Uh , but, but they're, they're just marketing to millions of people and you just happen to be one of them.

Chase Peckham:

Right. And there you go, you hit it on the, when you, when you actually applied for the car and got the car loan, anytime you apply for a credit , uh , product for a line of credit, for a refinance or to purchase something , uh, that is considered a hard inquiry whenever you fill out an application , uh, and they are going to shoot, when you fill out an application for a rent and you , they're looking up your credit score , um, that is a hard quote , unquote hard inquiry. The thing about that though is, and , and , and even though maybe they negatively will, it might negatively affect your credit a little bit, but I mean, that has to happen in large clusters. It's not like you go out and you apply for one loan that all of a sudden your credit score is going to go down. It's really not. This is if you are applying for a lot of credit in a short period of time,

Felipe Arevalo:

Yeah. This would be like, you went out black, Friday shopping or something. And, you know, and it was something where you wanted to get all the special coupons from all the stores at the mall and you applied for five or six of them, you know, that's when it's going to be like, Whoa, wait a minute. That was a ton of them. It's funny. Speaking of like spam auto calls, I got one right now. Um ,

Chase Peckham:

Seriously, they happen all the time. You're not kidding about the extended warranty thing. I mean, they are not threatening, but it's like, Oh, you're going to miss the most important thing ever. If you don't get this extended warranty.

Felipe Arevalo:

It's like your car will break down and your car will require repairs. And what will you do without a warranty?

Chase Peckham:

Right, what will I do without that monthly payment? You want me to do.

Felipe Arevalo:

Right, exactly. From a random company, I've never heard of.

Chase Peckham:

Exactly read the fine print.

Felipe Arevalo:

Exactly. And that goes for everything, you know, personal finance or, you know, you get emails and, and , and they may make you , you know , great offers on whatever it is, you know, just be cautious if it sounds too good to be true with personal finances or anything else, you want to be a little cautious. Um, let's see, let's go on to the next myth. Um, and is it illegal for creditors to take a negative, to take negative, accurate listings off your credit report? The law requires that these items remain on your credit report for at least seven years.

Chase Peckham:

Again, not true.

:

And this is one where the wording is very important because people hear the seven years and they say, Oh yeah, I heard that one time , uh, you know, things down there for seven years. But the key word here in the , in, in the myth is it's is required. And, and it's the other way around it's after seven years, it's required to fall off of your credit report, but that doesn't mean that it has to stay on there for the full seven years.

Chase Peckham:

Right. That's right . So it depends on how you word it, but people hear that seven year mark and they think that it's gotta stay there , uh, the entire time. No , uh, it's just saying it has to fall off after that certain amount of time if it's on there.

Felipe Arevalo:

Yeah. And this is one where, you know, we had a , a guest Jory on and he was saying that, you know, he was kind of explaining how this all works and the fact that you , uh, if you're negotiating a , uh, if you're negotiating with a collection agency, for example, you can have this be part of the negotiation and have that, you know taken off.

Chase Peckham:

Absolutely. Absolutely. Uh, the last one that , that we get a lot of hits on is you can boost your scores by asking your credit card company to lower your limit. And that is absolutely the opposite. If ever remember, what was it, Phil? You brought it up earlier about the debt to credit ratio and that being 30% of your score. And if you're actually asking a company to lower your limit , uh, that's , that's hurting that number, not helping it.

Felipe Arevalo:

Yeah. And really the, I mean, aside from, you know, maybe you paid off your debt and you realize, wow, I got myself into too much trouble because I have too much available credit limit. And if I don't, if I have all this available credit, I'm going to end up there again in six months or whatever the case is, I'm going to overspend again, you know, there's really no need to , uh , reduce your credit limit if you , uh, if you leave it as is it just, don't go falling into that debt. And you know , that's going to help you more in the long run is going ahead and having that available limit in the event, you have to, you know, carry a balance again.

Chase Peckham:

Yeah, for sure. I mean, there's so many myths to all these things , uh , and credit is difficult. Uh, there, there's so many things to it. I mean, that's personal finance in general, right? There's just so much to it . So much to learn why so many people have such a hard time with it. Uh, you know, that, I mean, that's why we do this podcast, right. Because it can be so intimidating and you get told so many different things. And a lot of times it's because somebody wants you to buy a product or they don't want you to buy somebody else's product or what have you, what have you , uh, but it can't, you know, you can find the info , the right information for all this.

Felipe Arevalo:

Yeah, for sure. And if you have any questions, feel free to reach out. We're more than happy to help. We're more than happy to answer them, or maybe even put them on the next Q and A that we're going to have here coming up at some point.

Chase Peckham:

Absolutely. No doubt. I mean, well, this was a fun one.

Felipe Arevalo:

Yeah.

Chase Peckham:

And , uh, I look forward to doing it again. We'll do more of these , uh, these common misconceptions in personal finance. Take it easy Phil.

Felipe Arevalo:

Yeah, you too . [inaudible] .