The credit reporting system in this country is very complicated. There are three major credit bureaus that track your information and they all collect, analyze, and relay this data differently. Due to the convoluted nature of this system, there are many credit reporting myths that have developed. It's important to be aware of these myths and understand the truth about how they relate to your credit report.
- I don't need to check my credit report if I pay my bills on time.
This is simply not true. There are many ways to develop inaccuracies in your credit report, and paying your bills on time doesn't protect you against problems incurred due to identity theft. The best way to catch and correct these issues in a timely manner is to check your credit report on a regular basis.
- Checking my credit report can damage my credit score.
It's important to understand the difference between a hard check and a soft check of your credit report. A hard credit check occurs when lenders review your credit information. Soft credit checks occur when you review your own information. It's possible for several hard credit checks made in close succession to damage your credit score, but soft checks are considered an important way for you to monitor your information and therefore don't count against your credit score.
- A debt will be removed from my credit report once I pay it off.
Negative entries can remain on your credit report for 7-10 years. Therefore, it is common for large debts, delinquencies, foreclosures, and bankruptcies to stay on your credit report long after they are resolved.
- There will only be one entry per debt displayed on my credit report.
It's possible to have 2 negative entries on your credit report for the same debt. This commonly occurs when the debt is sold to a collection agency. In these situations, both accounts may appear on your report.
- Cancelling an old credit card will damage my credit score.
This is one of the most common credit reporting myths, and nothing can be farther from the truth. Cancelling your oldest credit cards will not damage your credit score in any way. That being said, closed accounts often remain on your credit report longer than negative entries. Keep in mind that closing a credit card with a high limit while you have outstanding debt can impact your credit utilization ratio. To guard against this factor potentially damaging your credit score, always close accounts with a small line of credit or when you have a zero balance on all your cards.
- Working with a credit repair agency will improve my credit score.
Hiring a reputable credit repair agency can help you resolve inaccuracies on your credit report in order to repair a poor credit score. However, these companies generally won't be able to get factually accurate information removed from your credit report since these negative entries are legally entitled to be there.
- Bad debts automatically get removed from my credit report after 7 years.
This is simply not true. While credit bureaus may remove negative information from your report after 7 years, they aren't required by law to do so. As a result, this information may sometimes remain on your report after this 7 year period has passed.
- Small debts, such as outstanding parking tickets, don't count against my credit score.
This is not always true. Unpaid library fines, parking tickets, and other small debts can be turned over to collection agencies. In this situation, they could appear as a negative entry on your credit report.
- All credit reports are the same.
As stated earlier, there are 3 major credit bureaus that provide information to lenders, creditors, landlords, and others who may be entitled to access your credit information. Each of these bureaus tracks different information and presents it in their own unique way. In order to stay on top of your credit information, you should request a free copy of your credit report from each of the major bureaus (Equifax, Experian, and Transunion) once a year.
If you need assistance with a credit reporting issue, please contact the Law Office of Howard D. Silver by email or call (855) 341-2611 today to schedule a free consultation. Mr. Silver serves clients in Los Angeles, Riverside, Ventura, and San Bernardino Counties, and throughout California.