5 Money Myths to Stop Believing Today

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It’s always wise to take financial advice from friends and family with a grain of salt. But sometimes, even people you might consider to be money experts can lead you astray.

A few months ago, a friend of mine reached out to me to double-check some advice his wife received from a mortgage loan officer. The officer said a good way to boost your credit score is to carry a balance on your credit card that’s 50% of the card’s credit limit.

Not only is the suggestion factually wrong, but following it can be dangerous to your financial health. But this isn’t the only money myth going around; others are equally alarming.

To help you avoid getting duped, we’ve put together a list of five money myths, explaining why they’re wrong and what you can do instead.

1. Carrying a balance on your credit card can boost your credit

Your payment history and the amount you owe are the two most influential factors that determine your credit score. But neither of the pieces of advice the loan officer gave my friend’s wife — carrying a balance is good for your credit, and you should target a 50% credit utilization — impacts these two factors in a good way.

The first piece is wrong because FICO and other credit scoring models consider only whether your payment was on time or not.

On the second piece, a 50% credit utilization ratio isn’t ideal because it can hurt your credit score. Many credit experts recommend keeping your utilization below 30% so that it doesn’t damage your credit score, but that’s not a hard-and-fast rule. Ultimately, the lower your utilization, the better it is.

If you do carry a balance with the hope of boosting your credit score, however, you’d be on the hook for interest charges. And if you’re carrying 50% on a card with a high credit limit, that interest could pose a threat to your financial well-being.

What you can do: The best policy for responsible credit card use is to pay off your balance on time and in full every month. Also, keep your credit utilization as low as possible.

2. You’re throwing money away by renting

Homeownership is a big part of the American dream, but according to Sahil Vakil, a certified financial planner and owner of Myra Wealth, the suggestion that you’re throwing money away by renting is relative. Depending on your financial situation and the housing market where you live, owning a home might be unrealistic.

“Yes, there is a huge investment piece to [homeownership],” said Vakil, “but there are also a lot of throwaway components that are a part of the homebuying process.”

For example, closing costs can run between 2% and 5% of the loan amount, and you might not recover that money if you sell the house a few years later. Add maintenance and repair costs, and you could end up spending more out of pocket than you get back from the appreciation in home value.

What you can do: “If we take real numbers and facts and we actually run the data,” said Vakil, “we might see different results on different properties.” Before you decide whether to rent or buy, use an online calculator to do the math. Using the calculator, here’s an example of the rent-versus-buy situation:

renting versus buying myth

Image credit: Realtor.com

3. You don’t need life insurance if you have no dependents

While most people view life insurance as a way to provide income replacement for loved ones they leave behind, but that’s just one of its uses. According to a 2017 report by LIMRA, an insurance market research firm, the top reason people buy life insurance is to cover burial and other final expenses. Whether you have a family of six or you live on your own, someone has to pay those costs.

If you pass away with no insurance coverage, your parents or other family members could be forced to pay those expenses, whether they can afford them or not. Funeral costs alone can range between $7,000 and $10,000 on average, according to Parting.

Another reason for people without dependents to consider buying life insurance is to lock in low premiums. Life insurance rates are based largely on your age and health, so the younger and healthier you are, the cheaper will be the coverage.

I bought a large policy shortly after my wife and I married, long before we had our first child. We have two children now, but that original policy still is enough to cover my family’s needs. And with the health issues I’ve developed in the meantime, I’m paying much less in premiums than I would have if I had waited.

What you can do: Take the time to see if life insurance is right for you based on the reasons above. If you need just enough to cover funeral and other final costs, you can look into a small policy for a few bucks a month.

4. You need to have a lot of money to invest

Financial advisors typically recommend saving at least 10% to 15% of your income toward retirement. But only 27% of Americans do so, according to a 2018 survey by the National Foundation for Credit Counseling.

Some people might think that saving just a little here and there for the future isn’t worth it. But the longer you wait, the harder it will be to achieve your goal. And if you wait too long, you could end up working long after your friends quit their jobs to enjoy retirement.

“If you think of interest and how accumulative interest works,” said Vakil, “even if you start with small numbers, they can go a pretty long way.” The important thing, according to Vakil, is to develop the habit of saving.

What you can do: Sign up with a micro-investing app such as Acorns and Finhabits, which allows you to invest with just a few dollars at a time, or even less. Also, check out other top investment platforms to see if there are better options for your personal situation.

5. Checking your credit score hurts your credit

Every time you apply for a loan or credit card, the lender checks your credit with a hard inquiry. Depending on the circumstances, this inquiry can knock a few points off of your credit score. That same rule doesn’t apply, however, when you check your own credit score.

To be fair, it’s understandable why many people believe this myth. Until a few years ago, it was almost impossible to get free access to your FICO credit score, so consumers just didn’t have enough information on the subject.

Checking your own credit results in what’s called a soft credit inquiry. The same thing happens when a landlord checks your credit as part of a loan application, an employer checks your credit as part of a job application, or a lender checks your credit to send a preapproved offer. Unlike a hard inquiry, a soft inquiry doesn’t impact your credit score.

Not checking your credit score regularly can prevent you from catching errors or fraud in your accounts. Disputing errors and fraud can take months to resolve, and if the impact is bad enough, it could prevent you from borrowing the next time you need money.

What you can do: Sign up for a service like Discover Credit Scorecard to get free access to your FICO credit score. Check your credit score regularly to make sure it’s error-free and stays on track to where you want it to be.

Vet financial advice to avoid more myths

Some pieces of money advice are bad for everyone, but some are relative. “A lot of topics have a gray area; it’s not always black and white,” said Vakil. “Some situations it might be true for some people, but not for others.”

Before you put a money suggestion into practice, vet it. Ask around, do research online, and seek professional advice. But don’t just stop there. Even if you hear something from someone you trust, verify it with other sources. And don’t do something just because a friend or family member recommended it. The intent might be sincere, but that doesn’t mean it’s good advice.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderVariable APREligible Degrees 
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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.57%-8.17% (2.57%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.

2.57% – 6.98%3Undergrad
& Graduate
Visit SoFi
2.47% – 5.87%1Undergrad
& Graduate
Visit Earnest
2.47% – 8.03%4Undergrad
& Graduate
Visit Lendkey
2.80% – 6.22%2Undergrad
& Graduate
Visit Laurel Road
2.48% – 6.25%5Undergrad
& Graduate
Visit CommonBond
2.57% – 8.17%6Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.