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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Common Misconceptions Millennials Have Regarding Credit
Credit scores can be quite confusing, even for those who know how to build their credit. However, for individuals who are just starting to build credit, it can be extremely complex. Unfortunately, due to this complexity, many people, especially in the millennial generation, find themselves in need of consolidated credit services, sooner, rather than later.
The good news is, by getting to know more about credit, and common misconceptions related to it, these individuals can avoid getting into too much debt.
Misconception 1: By Using a Credit Card You can Build Good Credit
Approximately half of all millennials who have been surveyed believed that if they were to use a credit card, they could improve their credit score. Unfortunately, this is a misconception that is believed by more than just the millennial generation. There are quite a few adults who have well-established credit histories who also believe that by using a credit card they can improve their credit rating and history.
The fact is, credit utilization alone won’t effectively build credit. What builds credit is making on-time payments on the bill. While using a credit card may be one step in the process of building great credit, it is only one and the others have to be remembered, too.
Misconception 2: A Soft Credit Pull will Impact Your Credit Rating
Approximately 45 percent of all Millennials think that a soft credit pull is going to affect their credit rating more than a hard pull will, or that it would have the same level of influence. As a result of this believe, it isn’t too hard to believe that less than half of all millennials have actually checked their credit rating in the previous month. The majority of this generation doesn’t check their credit scores on a regular basis, which means that they are now walking around without really understanding where they stand regarding their credit.
The fact is, soft credit pulls don’t affect a person’s credit rating. Instead, it provides a way for creditors to find out a general overview of your credit. This will help with various decisions including whether or not a home mortgage application or new credit application should be approved. On the other hand, hard credit pulls can actually reduce a person’s credit score (especially if there are a large number done in a short period of time), which is why it is a good idea to allow a creditor to do a short pull before a hard pull.
Misconception 3: The Federal Reserve is Actually One of the Main Credit Bureaus
When a poll was taken, about 40 percent of all millennials were not able to identify the three primary credit bureaus. Also, when they were given a list that included Experian, The Federal Reserve, TransUnion and Equifax, they were unable to determine that the Federal Reserve was not a credit bureau.
Even though quite a few people may find it difficult to name all three of these when put on the spot, most adults know that the Federal Reserve is not a credit bureau. It is very important for everyone to know the names of the credit bureaus so they know who to turn to if there is an issue with their credit.
Even with more information, many people still make credit mistakes. If a person finds themselves drowning in debt, they should turn to Credit Consolidation to learn about the options that are available for their situation. This will ensure they can get out of this debt and restore their credit rating so they can purchase larger items down the road.
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