3 Myths About Bad Credit that Need to go

Some myths are harmless or even beneficial — and every parent who has relied on the myth of the (royalty-free!) Tooth Fairy to coax a little one from throwing a “my tooth is loose” tantrum know this all-too-well. And then of course, there’s Santa Claus and the Easter Bunny. Truly, who wants to live in a world without toy-making elves and chocolate eggs?

However, on the other end of the spectrum are some myths that don’t just need to be ignored, but they frankly need to go — not next year, next week or tomorrow, but right now this very moment. And atop the extermination list are three massive falsehoods regarding one of the most dreaded phrases in the financial vocabulary: bad credit. Here we go:

Myth: If you have bad credit, forget about renting an apartment or getting a job.

Fact: While it can be tougher to rent an apartment or get a job with bad credit, it’s by no means impossible. Remember, we’re talking about bad credit here, not a murder conviction. If you’re prepared to put your bad credit history in context — i.e. explain to a landlord or employer how things went sideways and what you’ve done to fix things — then you can shift the focus to what actually matters: whether you can pay your rent, and whether you’re a good fit for the job (and of course, vice versa).

Myth: If you have bad credit, getting a business loan is dreaming the impossible dream.

Fact: Again, this is simply false. Many companies in the alternative lending marketplace offer business loans for bad credit. While you might pay slightly more than with a conventional bank loan, there some advantages as well, such as greater flexibility, and the fact that business loans in the alternative lending marketplace can take days to get approved vs. months at banks. In fact, some SBA-facilitated loans take more than half a year to snake through dozens of administrators.

Myth: If you have bad credit now, you’re going to have bad credit for years and years.

Fact: Improving your credit score is not a tedious uphill struggle. In fact, people who’ve declared bankruptcy can start rebuilding their credit score right away by obtaining secured credit cards, and prudently paying balances on time. Within a few months, a credit score can spike by dozens of points, and within a couple of years it can rise a couple of hundred points — from the 500s to the 700s.

The Bottom Line

If you’ve subscribed to any — or perhaps all — of the above myths, then be assured that you certainly aren’t alone. There are plenty of folks out there that keep these falsehoods alive, because it’s in their self-interest to do so.

But the truth — as is so often the case — is much less dramatic, and much more down-to-earth. Yes, bad credit is a problem. And yes, it’s very common (research shows that one in three people have bad credit). But no, it’s not a punishment that keeps on punishing. It’s something you can pragmatically work around, as you build your score over time. You’re in control. And that’s no myth!

 

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