The Review — 04/06/2018 at 16:00

5 Financial Myths That Are Totally False

by

nyc

It’s astonishing how much financial misinformation manages to float around the Internet.

Let’s separate fact and fiction.

These are five financial myths that are totally false, and what you should know instead.

1. Your home is an investment

Your home, first and foremost, is a place to live where you can find peace and comfort.

Yes, you can make money buying and selling real estate, but don’t expect that your home will automatically yield big profits. You can also lose money on your home.

So try to separate home buying and home investing. If you want to be a real estate investor, consider owning a rental property or invest in REITs, for example.

2. Buying is always better than renting

Not always.

It depends on several factors, including where you live. Housing and rental prices change over time, and vary by geography, so there isn’t a brightline rule. To make a fair comparison, consider the full cost of ownership, including property taxes, mortgage costs, real estate transaction fees and property maintenance, among other costs.

Also consider your short-term and long-terms goals, including if you plan to move or need more space in the coming years.

3. Carry a credit balance to increase your credit score

No. Don’t carry a credit balance, unless you like paying interest.

If you have a credit card, pay it off in full each month. That can demonstrate a pattern of financial responsibility. Plus, you can enjoy other perks like cash back and travel rewards.

If you can’t pay off your credit card in full each month, then you shouldn’t use a credit card.

If you want to increase your credit score, focus instead on managing your credit utilization.

Lenders evaluate your credit card utilization, or the relationship between your credit limit and spending in a given month. If your credit utilization is too high, lenders consider you higher risk.

Ideally, your credit utilization show be less than 30%. If you can keep it less than 10%, even better. For example, if you have a $10,000 credit limit on your credit card, ideally you should spend less than $1,000 in a given month.

4. You only have one credit score

You may have hundreds of credit scores, each calculated by consumer companies and banks. That said, there are three major credit bureaus that act as credit reporting agencies: Equifax, Experian and TransUnion. Each credit bureau offers a credit score.

For better or worse, your credit score is the gateway to an array of financial products such as mortgages, auto loans, personal loans, credit cards and private student loans.

FICO credit scores are among the most frequently used credit scores, and range from 350-800 (the higher, the better). A consumer with a credit score of 750 or higher is considered to have excellent credit, while a consumer with a credit score below 600 is considered to have poor credit.


Zack Friedman – Read the full article on Forbes.com


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