Credit Repair Myths and Misconceptions
Old Wives Tales about Credit Scoring
Credit Repair myths and misconceptions are as numerous as the myths of ancient Greece and Rome combined. The following are some of my favorites. This list is by no means complete. Just when I think I’ve heard them all new ones pop up.
Credit Repair Myths and Misconceptions
- Credit Bureaus grant or deny credit. Credit Bureaus merely gather information from various sources such as merchants and public records. This information is provided to their clients such as banks and credit card issuers after being scored according to the way FICO’s computer measures the consumer’s probability of paying as agreed. In short how much of a risk you represent to a lender is based on your past history of paying your bills on time and a number of other factors. Credit bureaus neither grant nor deny credit.
- You have to remind credit bureaus to remove data after 7 years. The credit bureaus must remove most negative entries after 7 years. Exceptions include bankruptcies, unpaid tax liens, and child support. They do this on their own, or they’re supposed to. The kernel of truth to this myth is that the negative entry on the report doesn’t always include the proper date. The clock begins to tick for automatic removal on the date of first delinquency. It is common, but illegal, for credit bureaus to report the initial date as the date the debt collector first reports the matter and count down from there. It is up to you to monitor your reports to make sure that all data is correct.
- Criminal Records are Included. Credit bureaus have the legal right to report criminal convictions but they don’t. I know of no exceptions to this.
- There are only 3 credit bureaus: Equifax, Experian and Trans Union. While it is true that these 3 bureaus are used by the vast majority of lenders there are actually many more. The Federal Consumer Protection Bureau is monitoring 30 of them. Others include, but are not limited to, Innovis, Core Logic, Lexis-Nexis and Choice Point. If you are denied credit the lender must disclose to you where the data came from.
- Courts send public records to the credit bureaus. The courts do no such thing. There are several companies that supply the Courts with public records. For instance, the ink will be barely dry on a bankruptcy filing when it is recorded by the credit bureaus. Bankruptcy courts have nothing to do with it. These records, along with tax liens and judgments, are picked up by a system called PACER as well as other vendors of public records.
- Utility records are included. Utilities do not send your information to the credit bureaus. If you have a negative entry from a utility company it is because they have a judgment against you, not because they send in regular records. Paying in an irregular manner will not hurt your credit score.
- Income is included. There is no record of your income on your credit reports. Many years ago they did keep a record of it. This practice was stopped for several reasons. Many times income varies wildly from year to year. Opportunities for deception abound. Reports of income are just too unreliable. Bottom line: Income is not that great of an indicator of whether you can be trusted to pay your bills, live within your means and handle credit responsibly.
- Credit bureaus are run by the government. Fact: Credit bureaus are private for profit corporations that are now overseen by a government agency called The Federal Consumer Protection Agency.
- Your age counts. Your age is not factored into your credit score. Of course the credit bureaus have your date of birth but this is not considered in scoring. The age of your credit history is very definitely a significant factor so older people usually have the advantage there.
- Employment history counts in your score. This is one of the Credit Repair Myths and Misconceptions that persists because your occupation is listed under personal facts as a further identifying factor. This is frequently outdated because when you change jobs your employer will not report it. It is only updated when you apply for new credit and it is submitted to the bureaus that way. You can write the bureaus and correct outdated information if you want.
- Using a credit counseling service is a negative. Credit counseling services are neutral to your score. If you settle your debts for less than face value however it will be reported as such which is a definite negative!
- You need to carry a balance on your credit cards to help your score. Wrong. No one cares about your balance except as it affects your debt to available credit ratio which is a very important to your score.
- My statement of explanation will help. Your credit score is based on numbers not words. These statements do more harm than good. Excuses impress no one and it is almost always hard to make such a statement without it being an admission of guilt.
I’ll report on more credit repair myths from time to time but I must leave right now. I think I just saw Bigfoot flash past my window riding a Unicorn!!