Hit or myth?

Sometimes people in the military have interesting beliefs about things that impact their finances. Sometimes they’re correct; sometimes they’re partially true; and sometimes they’re just flat wrong. Check out the statements below – hit or myth?

“Shopping around for a loan will kill my credit score.”
This one is a myth – sometimes. When you apply for or inquire about getting a loan, a lender will request a copy of your credit score from the major credit bureaus (that’s called a hard inquiry.) And usually, each hard inquiry will cause a small reduction in your credit score because it can be a sign that you have taken on a new debt that hasn’t shown up yet on your credit report – which would make you more of a credit risk. But, the major credit bureaus and their score providers have made an exception if you’re shopping for an auto, home, or student loan. In that case, they treat multiple hard inquiries within a short period (it varies from 14 to 45 days) as a single inquiry, since they understand you’re just looking for the best deal, not planning to take out ten new loans. So, shopping around for a few weeks for a car, home, or student loan shouldn’t have much effect on your credit score.

“If I buy something, I am guaranteed a 36-hour “cooling-off period” where I can change my mind and cancel the deal.”
This one is mostly a myth but there are a few transactions that may have a cooling-off period. The Federal Trade Commission’s Cooling-Off Rule generally gives you three days to cancel purchases of $25 or more if the sale was made at your home, workplace, or dormitory, or at facilities rented by the seller on a temporary or short-term basis, such as hotel rooms, convention centers, fairgrounds, and restaurants. Federal law also provides limited cancellation rights for some types of mortgage loans and student loans, and state law in some states might have cooling-off periods relating to real estate deals, such as apartment leases.
In the vast majority of cases, though, once you’ve bought it, it’s yours right away and there’s no going back in a few days and saying “I’ve changed my mind.”

“I have to be behind on my mortgage payments before I can apply for a loan modification or short sale on my house.”
If you’re in the military, this is now a myth in many cases. The Department of the Treasury, the Federal Housing Finance Agency, and the government-sponsored enterprises Fannie Mae and Freddie Mac have all changed their guidance to say that a military permanent-change-of-station move qualifies you to apply for a loan modification or short sale even if you’re not behind on your mortgage payments. Be sure to mention your military status and PCS orders when you talk to your lender!

“If I enter active duty with student loans, the thing to do is ask for a military deferment on the loans so I don’t have to pay.”
I’d call this one a myth in most cases. Unless it’s a subsidized federal student loan, the loan will keep accruing interest even though you’ve deferred payment, and you’ll end up owing even more (maybe a lot more) by the time you leave active duty. Consider this instead: no matter what type of loan it is (federal or private) under the Servicemembers Civil Relief Act, you could ask your loan servicer to reduce your interest rate to six percent while you’re on active duty. And if it’s a federal loan, you could also sign up for Income-Based Repayment so your monthly payment’s affordable, and you could count your payments towards Public Service Loan Forgiveness and be done with the debt after 120 qualifying payments.

“I can get a free copy of my credit report from each of the three major credit-reporting agencies every year at www.AnnualCreditReport.com .”
This one’s a hit! www.AnnualCreditReport.com is the official site to get a free copy of your credit report once a year from Equifax, Experian, and TransUnion. Other websites – including FreeCreditReport.com or CreditReport.com – are not.

“If I have a bad credit report the first thing I should do is pay someone to fix it.”
Myth! If there are mistakes on your credit report, you can contact the credit bureau – or the company that provided the information – yourself and request they be fixed. But if the negative information on your report is legit, then only the passage of time will make the bad info disappear – you can’t speed up the process and neither can a credit repair company.

“If I am deployed to a combat zone, the government offers a savings account that earns ten percent interest while I am deployed.”
Hit! The Savings Deposit Program will earn ten percent APR on up to $10,000 while you are deployed to a combat zone. You can set up the account through your unit’s finance officer once you are deployed.

“The CFPB can fix all my financial problems.”
Sorry, that’s a myth! But we can help you with many of your consumer financial issues. Come see us at consumerfinance.gov/servicemembers and learn what we do!