Myths About Credit Reporting |
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At present, borrowers with a bad credit history are completely perplexed by the opposing claims of credit bureaus and the credit repair companies. While the credit bureaus have initiated a huge public relations campaign to forbid consumers from trying to repair or improve their credit by telling that it is impossible and illegal. According to them, it can be achieved to some extent only through the methods given in the Fair Credit Reporting Act, which includes the consumer statement and the dispute method.
On the other hand, consumer rights groups and the FTC (although it has a more pro credit bureau leaning) are seeking reforms in this regard. There are also attorneys and credit repair services who claim that credit repair is possible for a fee. Actually, the concept of credit reporting is shrouded by all kinds of myths. The present article attempts to reveal the truth behind all such myths. Paying My Debts Will Make My Credit Report Instantly Pristine According to Maxine Sweet, vice president of public affairs for Experian, one of the three major credit-reporting agencies, a credit report contains the history of your payments and your payment pattern, it does not just reveal your current payment position. Being the author of famous Web column, "Ask Max," she constantly reminds individuals that you can't alter the previous record. Credit Counseling Always Destroys My Credit Score No scoring model considers participating in a credit counselor's debt management program as negative or as damaging for their scores as filing for bankruptcy. Nevertheless, if the credit counselor settles a reduced contractual obligation, it is up to the lender to decide how to report it. Therefore, if your $500 monthly payment is negotiated for $300, the creditor may either lawfully report the balance of $200 in arrears each month or show appreciation for your not filing bankruptcy by reporting the account as current. Although credit counseling does not have much impact on your credit score, your report contains information that you've undergone counseling. Individual creditors may not like this reference on your report and their response to it may also differ. Canceling Credit Cards Boosts My Credit Score The common belief is that multiple open accounts imply available, prospective debt, so it is wiser to close them. But experts believe that if you possess, at least, two or three active accounts, then the creditors will get the message that you are capable of handling your debt in a responsible way. Even unused credit cards don't affect your credit rating. The prevailing myth is that such unused cards are not considered good by the prospective lenders. The fact is that if you are making regular and prompt payments and are not overextending yourself, just the availability of $5,000 on a credit card that is not being used does not mean that you will be trapped in debt in the near future. Even starting one charge account once in a while to benefit from a 10% offer has no impact on scoring, but if you open 15 such accounts during the holiday season, then you can fall in trouble with your credit scores. Checking My Own Credit Report Harms My Standing The reporting agencies make a difference between soft and hard pulls. When a reputed company verifies your credit report before issuing its credit line, then it is considered as a hard pull by the agencies. It lowers your scores. If others like credit counselors do it properly, then it is termed as soft pulls, which do not appear on the report. So, people should opt for a soft pull and for this purpose, they should directly approach any of the three bureaus. Checking your credit scores is very empowering. You can choose between either being quite aggressive with your credit management and checking your score at regular intervals or assuming a more passive approach by checking it every year. Bottom Line? The fact is that a creditor can alter an item for which he has the responsibility of reporting and confirming. All the creditors make gains by collecting their dues from their customers, not by reporting negative credit information. But some creditors also make a deal with the credit bureaus that they will not permit the deletion of a negative listing on settlement. Bigger creditors like major credit card companies or banks will agree to remove a negative listing only under pressure, but almost all creditors can be persuaded to do so after some convincing efforts. Any creditor reporting to the credit bureaus has the right to alter the reported information. |
