Isn't the credit report one of the most confusing things on the planet? Not only is there more than one credit bureau taking in your credit information, there are three places to track all of the data that is circulating about you.
There is no doubt that the entire process of keeping track of your credit reports and making sure the right information is on them can be exhausting. But what can be even more exhausting is acquiring the wrong information about credit reporting, which could have a horrible effect on both the report and your credit score.
To avoid the turmoil that inaccurate information about the credit report can bring, it's good to address credit report myths. Here are the top 10 to know:
1. Checking My Report is Unnecessary if I Pay My Bills
Many people think that just because they pay their bills on time, they don't need to check their credit report. In understanding credit report information, you learn that there could be information on your report that has nothing to do with you. So just because you pay bills on time doesn't mean that there isn't an inaccurate account ruining your credit score, or worse, that someone else hasn't stolen your identity and opened numerous accounts in your name.
Checking your credit reports is something everyone should do often to make sure the information is accurate at all times.
2. If I Check My Credit Report, it Will Hurt My Credit Score
Now's the time to learn the difference between a hard pull and soft pull, as well as the impact of checking your own report. A hard pull means that a lender or creditor is looking at your report to determine your credit worthiness. This type of pull could lower your credit score by a few points and is viewable for other lenders to see how often you're applying for loans and credit extensions.
A soft pull, on the other hand, is usually done by credit card issuers and lenders who want to pre-approve customers and view credit report information for a basic idea of your credit history. The soft pull is not visible to anyone but you and doesn't have a negative effect on your credit score.
Finally, the lowest level of the credit check is you checking your own. No one sees when you check your credit and it doesn't affect your score. So if you've been afraid to check your report, now's the time to get started.
3. Paying a Debt Off Will Get it Removed From My Report
Some borrowers are often very frustrated to learn that after they've paid off a debt, it isn't magically removed from the credit report. Unfortunately, the information doesn't have to be removed for seven years on most collection accounts, and as much as ten years for bankruptcies.
This means, even if you pay off your debt, you will most likely have to look at the account until it drops off. The only way around it is to negotiate with the creditor to have it removed – but it's totally up to them to do so.
4. The Original Creditor and Collection Agency Can't Both Be Listed on My Report
If you owe money to a company that has asked a collection agency to collect the debt for them, both accounts are allowed on your credit report. Yes, this means that you could legitimately have two listings on your report for the same account. It's not fair, but credit bureaus don't frown upon this, so until something changes, your report could be littered with more delinquencies than you actually have.
5. Canceling My Credit Cards Can Help My Report and Score
Depending on how long ago you received your credit card, it may be the one thing holding your credit history together. Part of how your credit score is calculated depends on the length of your credit history. So if you're trying to delete items from your report to shorten the length of your credit report, you could very well be deleting that 14-year-old account that is giving your score a boost.
6. Credit Repair Can Instantly Fix My Report
While it is true that taking steps to work with a credit repair agency could help improve your report and score, especially if some information on your report was incorrect, a repair agency really can't force a credit bureau to remove items that, by law, have every right to be there.
Some companies submit dispute letters in hopes of the creditor not being able to verify the account, which ultimately requires that the item be removed. But it doesn't always work, so beware of companies that promise to instantly remove items 100 percent of the time.
7. My Bad Debts Automatically Fall Off in 7 Years
Another misconception of the credit report is that after the allotted period of time to stay on the report, it will automatically be removed. Not true. Often times, credit bureaus will remove the information when the time comes, but other times, the same old information sits there for weeks or months, all the while causing problems for your credit score.
If you know that an item should have already been removed, it is up to you to dispute it to ensure that it doesn't have a negative effect on your score.
8. My Library Fines and Parking Tickets Don't Count
Yeah, right! Don't you know that just about anything could show upon your report nowadays? If you have unpaid library fines and parking tickets, they could easily wind up on your credit reports if they're turned over to collection agencies. Even some utility companies are now reporting regularly to credit
9. Credit Reports Are All the Same
Unfortunately, credit bureaus by no means include the same information on their credit reports. This makes keeping track of your credit rating and report information that much more complicated. However, this is no excuse for not knowing what's going on with your reports. It is your responsibility to check your credit report with each bureau (Equifax, Transunion and Experian) to see what information is listed and to make sure that it's accurate.
10. Debit Cards Can Improve Your Credit
Wrong! Your debit card and pre-paid credit cards are considered nothing more than electronic checks. Since they don't count as extensions of credit, they don't help your credit report or score in any way.
Now that you've dispelled some of the credit report myths, it's the time to check your own reports to improve your credit the right way.
See more financial tips at Go Banking Rates: