Thursday, September 21, 2006

Twelve Myths About Credit Reports

Seeing that I have been trying to clean up my credit report, I found this pretty interesting. Julie Sturgeon has an article on yahoo called, you guessed it, 12 myths about credit reports.

The myths are:

1) Paying my debts will make make my credit instantly pristine. Not true. Your poor payment history will still show on your credit report until it drops.
2) I must give permission for a for a company to see my credit report. Wrong. Pretty much any company can see your credit report with out your permission, only if ordering your report has to do with employment does the company need a signature for your permission.
3) Credit Counseling always destroys my credit score. Credit counseling doesn't count against your credit score, and most creditors don't even look at your credit report manually anyway so chances are that they will never see it.
4) Cancelling credit cards boosts my score. False. "Creditors want to see at least two or three pieces of active credit to prove you can manage debt responsibly" and the credit cards that you aren't using are not affecting your credit score.
5) To many inquiries hurt my score. Believe it or not this is not true anymore. If you are shopping around for mortgages or car loans, the credit agencies understand that you are trying to get the best rates, so this does not affect your credit score. Now if you are going to every department store in sight and applying for credit it will affect your score because these are considered hard pulls. Even checking your credit score at fico is not considered a hard pull.
6) Checking my own credit report harms my standing. As I said above checking your credit doesn't harm your credit score, but beware of companies giving free credit reports for purchasing their products. These companies are merchants the hits do count.
7) FICO Scores are locked in for six months. Not true, fico scores are dynamic so they constantly change as the information on your report changes.
8) I don't need to check my credit report if I pay my bills on time. In this day and age of Identity Theft you can't trust that you have perfect credit, or that the credit agencies have all of your information right. I knew that I didn't have perfect credit but when I pulled all of my reports it was full of wrong information. So check your reports yearly.
9) All credit reports are the same. Most creditors do report to the major credit agencies- TransUnion, Equifax, and Experian, but some don't. So your credit score accross the boards will never be the same because something showing up on one report may not show up on the other two. So if you are gonna check one report, you may as well check all of them.
10) A divorce decree automatically severs joint accounts. Actually it doesn't so if you want your ex off of your credit you better contact your creditors, and either close your current accounts or have your ex sign off of them.
11) Bad news comes off in 7 years. Some of it does, but some bankruptcies can stay on your credit report for up to 10 years and if you pay off a previous outstanding debt, it may stay on your report longer than 7 years.
12) I can always pay someone to fix or repair my credit. You can, this is done by the company flooding the creditors with letters of dispute. If the creditors can not verify the listing it must come off, but if the creditor is able to prove later that the listing was correct it gets put back into your file after 30 days.

I hope that this helps some of you out there. I know it cleared up alot of the myths I had about credit scores and how companies report your information.


prlinkbiz said...

You guys may want to research 3 and 5 a bit more. This info is always good-

Amateur Investor said...

Yeah it's hard to know what is exactly true when it comes to credit scores. I always think that every little thing effects your score, but the article says it may not. Personally I am not willing to find out, so I will just take their word for it.

Sirenbrian said...

Another interesting point about credit reports is that you are entitled to a free one every 12 months.

No, not those vultures with the TV ads, which will give you a free report if you sign up for a "credit monitoring service". An actual free report that the government says we are entitled to.

It's - honest, I promise, it's legitimate :)

Amateur Investor said...

That's actually a great point. This is how I got my credit reports for all three credit agencies. (Transunion, Experian, and Equifax)