MYTHS AND FACTS ABOUT CREDIT

Myth: If I keep my payments up-to-date with a creditor, that account will remain open and available for my charge purposes, regardless of my payment history with my other accounts.

Fact: It is a simple matter for any creditor to access information on your credit report. If a creditor has received negative information about your pay history on other accounts, your account may be closed to further use based on your history of payments on other non-related accounts.

Myth If I make my payment within the "grace period", there will be no negative information reported to the credit bureau and my creditor still considers it current.

Fact The grace period is a courtesy to debtors but in no way relieves the debtor from the obligation to make payments on or before the due date. The creditors understand that there may be a problem with the mail or other unforeseen circumstances, hence the grace period, but it is the DEBTORS' responsibility to insure that payments are made in a timely manner. Getting the payment in to the creditor before the grace period is up, has as its primary benefit the elimination of late fee. Payments may appear on the credit report as late.

Myth If, in the event of divorce, the court assigns any outstanding credit accounts to my ex-spouse; I no longer have a legal obligation to pay those debts.

Fact The contract on a debt is between the debtor and the creditor, NOT the court. Texas is a community property state. If an ex-spouse does not pay an outstanding community debt, the creditor will attempt to collect the debt from the other ex-spouse. The option is to pay the debt off, if possible, and proceed with a legal action against the non-paying ex-spouse in order to collect the amount of the debt. The ex-spouse is probably in contempt of court. It is a good idea to contact an attorney to determine your legal status.

Myth I can tell a creditor not to call me about a debt and they may not contact me further.

Fact You may send a CEASE AND DESIST letter to a collection agency. Upon receipt of such a letter, the agency may contact you once more by mail. Usually this correspondence will indicate the possibility of the primary creditor's intent to sue in order to collect the debt. THE CEASE AND DESIST LETTER DOES NOT APPLY TO THE PRIMARY CREDITOR. A creditor has up to four (4) years to file suit on a bad debt.

Myth In the event that I am having trouble paying by bills, if I make a small payment on my account of at least $5.00, in good faith, the creditor must accept the payment and cannot sue me.

Fact Your payment to your creditor is predetermined by the original contractual amount. Any deviation from that amount may cause a negative impact on your relationship with your creditor. A creditor may choose NOT to accept a lesser payment, and in any event, may proceed with legal action, in order to collect the debt.

Myth If one of my accounts is written off, I no longer have to pay that debt.

Fact You still owe the debt! The creditor involved may consider that the account is uncollectable BY ORDINARY COLLECTION METHODS, but thi does not mean there will be no attempt to collect the debt. There is both a legal and a moral obligation to honor the debt. The account may be referred to a special in-house collections division or worse, referred to an outside collection agency or attorney.

Myth The information on the credit report has to come off after seven (7) years.

Fact Some information should be removed from the credit report after seven years. There are several notations that may remain on the report for up to ten (10) years. For information on your personal credit report, contact the nearest credit bureau or Consumer Credit Counseling Service.

Myth If a creditor gets a judgment against me on one of my unpaid accounts, it will drop off my record after ten years?

Fact A judgment will be removed from the credit report after ten (10) years if the debt has been satisfied! If an account on which a judgment has been filed has a remaining balance, the judgment may be renewed until the debt is paid in full. A judgment may mean that the debtor also has been instructed by the court to pay interest, court costs and attorney's fees.

Myth If I file bankruptcy, I do not have to pay off any of my debts?

Fact There are different types of bankruptcy, with differing rules of debt liability. Moreover, some debts may not be included in a bankruptcy. Current tax liabilities are exempt. Current or past child support payments may not be included in a bankruptcy. Any federal obligation such as a student loan, FHA, or VA home loan deficiency balance is exempt. If you still have an outstanding mortgage loan, and there are delinquent payments, the payment must be brought current within a specified time frame and kept current or the home is forfeit. Any secured debt must be paid, or that security is forfeited.