Financial Literacy Myths – Debunked!
The subject of money can be intimidating. It’s one of the reasons many people put off learning about credit, mortgages, or other financial tools until right before they need them. Common myths and other partial truths further complicate matters, keeping people from achieving their financial goals.
In this post, we’ll debunk a few common financial myths to show how learning about personal finance can boost your confidence — and reward your wallet.
Myth #1: You Only Need Good Credit If You Want To Borrow Money
While good credit could help you secure a low-interest rate loan with favorable repayment terms, credit health also affects other areas of your life. Insurance companies, landlords, and employers may request access to your credit history report or credit score before deciding whether to provide you with services, approve your rental application, or offer you a job. They do so to better understand your level of financial responsibility.
Late payments, high credit usage, or other negative entries can be red flags to some. Protect your credit by paying your bills on time, keeping credit balances low, and removing errors that appear on your reports.
Myth #2: Buying A Home Is Always Better Than Renting
Despite the many benefits of homeownership, it’s not the best financial move for everyone. For example, renting might be cheaper than buying a home in the same neighborhood. Unlike homeowners, renters are typically not responsible for property maintenance and repair costs. These savings, plus a lower monthly housing payment, could leave more room in your budget to:
- Pay down outstanding debts
- Build your emergency fund faster
- Increase retirement savings
The benefits of buying versus renting will vary based on your situation and long-term financial goals.
Myth #3: Carrying A Credit Card Balance Will Improve Your Credit Score
According to Experian, one of the three major credit bureaus, carrying a balance on one or multiple credit cards can increase your interest charges and may lower your credit score. Paying in full each month or keeping a reasonably low balance is recommended to improve your score. Credit balances that exceed 30% can lower your score, even if you make on-time payments.
Maintain a good credit score by sticking to a plan that requires you to pay more than the minimum required payment each month. The faster you reduce the balance, the less you’ll pay in interest fees and the stronger your credit score.
Financial myths can keep us from achieving our money goals. While many of the stories we tell ourselves about money contain a nugget of truth, they often fall apart when we take a closer look. Expand your personal finance knowledge by exploring Call Federal’s Financial Wellness resources, including our Money & Beyond education portal. If you’d like to chat one-on-one with a Certified Credit Union Financial Counselor, visit our Financial Coaching page and complete the form. Let us know how we can help you on your journey to better financial health.
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