6 Personal Debt Myths Debunked
As a nation, we all love to give advice, especially when it comes to matters regarding money. This can be dangerous as many people are keen to follow the opinion of their friends and colleagues as opposed to seeking out the correct financial advice. While it may be a good idea to get a ‘feel’ for what your rights are, seeking out advice is vital. Use this guide as the basis of your research. Now it’s to debunk some old myths when it comes to personal debts.
1.Paying Off Old Debt Results in a Better Credit Score
In short, no. If you have a debt that is over seven years old, it should not be contained within your credit score anyway. All debt on your credit report should be seven years and younger. If it is, then you need to pay this off as a matter of urgency. Paying off a debt that is older than seven years will suddenly appear back on your credit report, so this will result in a negative mark.
With debt, pay off as much as you can in the main. But, focus on your debt that is younger than seven years. It is your newer credit agreements that affect your credit score, not old debt. So, make sure that you are keeping up to date with your existing debts to avoid any potential problems. It really is that simple.
2.The Ticking Credit History Clock: Can the Clock Be Restarted?
To a certain degree, you can restart the clock when it comes to your credit rating. But, there are some things to consider. Rather unsurprisingly, when it comes to debt matters, it’s not clear cut. You need to investigate how old your debts are. A creditor cannot force you to pay for a debt when it is old. What is more, these old debts cannot remain on your credit report forever.
But, you can accidently make people more aware of your old debt by verbally agreeing to it over the phone or an email. So, do be careful not to acknowledge debt if you are contacted by an old creditor. This means that they can take you to court to retrieve the money.
It’s not all doom and gloom. Your existing debt cannot be given a new ‘start date.’ So, if your debt is over seven years old, it cannot suddenly become a day old because you have admitted to taking out the loan. In short, you do have to worry too much about the ticking credit clock. Rather, you need to make positive steps and ensure that you are treating your debts as a priority. If you are finding this difficult, bill consolidation can help you with this process.
3.Making Payments Little and Often Keeps Creditors off Your Case
Sadly, this is simply untrue. Many people think that if they pay $1 per week as a ‘goodwill gesture’ they won’t have to worry about court proceedings. Unfortunately, the world of credit doesn’t work like that. You can be taken to court and sued if you don’t make payments or even if you make small, partial payments.
If you cannot afford to make payments, you need to thrash out an affordable rate with your creditors. In the main, they should provide you with a new agreement. However, if they don’t, you will need to seek the advice of a debt consolidation company.
You should never avoid communicating with your creditors. This can seek to worsen the problem and land you in hot water, or a lawsuit. Whichever comes first?
4.Paying Old Debts Means That the Debt is Removed from Your Credit History
No. Sadly not. Whether you pay off your credit and loan agreements, they will still be shown in your credit history. But, they will have a positive mark against them. This means that you will have a finance agreement in place that states paid. This can actually have a positive effect on your credit rating. So, don’t be scared about paying for debts upfront.
5.Telling Debt Collectors to ‘Go Away’ Means That They Have to, Legally
There is an element of truth in this. You need to arrange with your creditors that you cannot afford to pay the sum that is required. Communication is everything when it comes to debt collectors. They have the right to contact your property and your domestic address. Where the confusion lies is within your place of work.
If you tell a debt collector that they cannot contact you in your place of work, legally, they cannot. What is more, this has to be put into writing, so that you have an audit trail and proof of the request. They have to comply with this, so do make sure that you seeking out draft letters online to assist you with this quest.
You do not, however, have the right to drop a lawsuit. Debt collectors can still take you to court even if you request that they ‘leave you alone.’ So, make sure that you have a clear method of communication with your debtors. It will make your life easier in the long run.
6.You Can Inherit Personal Debts
You cannot inherit personal debts from a person that has passed away. Once you inform the appropriate creditors of the deceased person and their passing, they cannot expect you to pay for the sum that is owed. Typically, the assets and the sale of the estate will be used to clear the debt, if there is one. But, if the estate does not leave a lot of money left in the pot, you don’t have to pay the money back. Should you find yourself in a situation where people are asking for money, go to see a lawyer. This is the best way of ensuring that you are in a great financial place.
Debt can be a confusing thing. But now we have debunked these common myths; you can live a happier, healthier financial future.