Credit scores are easy to understand, and other financial myths
Understanding money is no easy task. In many ways, managing personal and family finances can seem more like an art form than a science — but that doesn’t mean data isn’t helpful.
In fact, over the years there has been a slew of new research and data for consumers to draw from to help improve the layman’s grasp of finance. Unfortunately, many aren’t taking advantage of it.
“When it comes to their personal finances, people carry around notions all their lives that may or may not be valid,” Bankrate’s Christina Couch wrote Wednesday.
In her article, “7 personal finance myths dispelled,” which also ran on Business Insider, Couch identifies multiple falsities that can trip up the financially challenged.
One example is the unfounded halo circling personal budgets. She points to a study by Brigham Young University professor of Jeff Larson that claims those with budgets typically spend up to 50 percent more on a single item than consumers without one.
“We don't claim that this indicates that you shouldn't ever budget,” Couch quoted Larson as saying. But he does believe consumers would benefit from “limiting their selection (or purchase) based on qualities and features before looking at price.”
Another myth she dispels is that one simple formula determines your credit score.
“There are actually dozens of different scoring models,” she explains. “Many lenders use the FICO scoring model, but some organizations have their own formulas. Credit bureaus also have multiple methods of calculating your score.”