Americans seem to be experts in debt — racking it up, that is. With all that money owed to creditors, we wondered how well Americans actually understand debt and credit.
What do you know? Here’s a quick quiz to find out — and some resources to help you fill in the gaps in your knowledge:
Co-signing a loan
Question: You want to help your son get a car, so you co-sign on the loan. Now, he’s stopped paying. That’s his problem, right?
Actually, it’s your problem, too.
Co-signing on a loan is the same as taking out the loan yourself. If your son — or whomever you were trying to help — stops paying, it can do a real number on your credit score. Even worse, a creditor can come after you for payment, and you could find yourself on the receiving end of collection calls or, worse, a garnishment order.
For more information, read “2-Minute Money Manager: If I Co-Sign a Loan, Can I Protect Myself?”
Marrying into bad credit
Question: Mr. Right has the wrong credit score. If you marry him, your credit score will take a nose dive, too. True or false?
Married couples share many things, but a credit score is not one of them. His bad credit will not affect your score, just as your good credit won’t pull his up.
However, just because marriage won’t affect your credit score doesn’t mean it won’t affect your creditworthiness. Joint account applications will look at both spouses’ scores, and that could mean less favorable loan terms if one spouse has a poor credit history.
Here’s what FICO, that’s the company calculating the most commonly used credit scores, has to say on the subject:
Most mortgage lenders will check both of your FICO scores when evaluating your loan application. Even if your wife’s good score would qualify her for a loan with a good interest rate, your bad score may mean that, as a couple, you would only qualify for a loan at a worse interest rate. If your score is very bad, you may not qualify at all.
For more information, check out:
Student loan debt
True or false: Student loan debt is like a phoenix. It can’t be killed, even in bankruptcy.
In many cases, this is true. Student loan debt is much harder to shed than other types of debt.
But that doesn’t mean it’s impossible. According to U.S. News & World Report, the biggest obstacle to having student debt discharged in bankruptcy may be the belief that student debt cannot be discharged in bankruptcy.
U.S. News said a study found that only 0.1 percent of those with student loans who filed for bankruptcy attempted to have their student loans discharged. Of those who did include them in their bankruptcy proceedings, 40 percent saw their debt discharged or at least reduced.
As MoneyTalksNews founder Stacy Johnson writes:
While it’s certainly not as easy to eliminate student loan debt through bankruptcy as other types of debt, it does happen. The key is proving “undue hardship.”
Read the full article for more detail on shedding student loan debt through bankruptcy and other student loan forgiveness options.
How did you do this round? Share your score in the comments below or on our Facebook page.