5 Myths About Credit Reports

Many people think they already know too much about their credit reports. It is surprising that most of the time, there are myths about credit records that are taken as truths by some individuals. Unfortunately, some of those myths may bring about devastating consequences. Here are the top five misconceptions about credit reports that should be immediately corrected.

1. Paying debts will instantly cleanse credit report.

Take note that a credit report is a long history of payments. It is not a snapshot of where an individual is at the moment. Paying all debts will certainly improve and boost anyone’s credit scores. But doing so will not erase what delinquencies are recorded. No one can change the past. Thus, if you want untarnished credit report, always be mindful of your bills, debts, and other payables.

2. Credit counseling will erode credit score.

Contrary to what many think, credit counseling will not be detrimental to credit scores. Some people think that hiring a credit counselor will reflect in the credit history and may indicate debt troubles. If a credit counselor negotiates for a lessened contractual obligation, it is up to the lender on how it wants to report that. In general, the credit score system may ignore reference to credit counseling.

3. Cancellation of credit cards may boost credit score.

It is not advisable to terminate all your credit card accounts even if you think those plastic cards are your source of debt problem. Credit reporting agencies have to base reports on existing credit accounts. Keeping a credit card account or two will be ideal as long as you do not incur too much debt on those. The use of those cards can also indicate and prove your responsible and effective debt management.

4. Divorce automatically severs joint accounts.

After divorce, credit cards, car loans, and house repayments may be divided but that may not translate to creditors making the division as well. There are many cases wherein after a year or two following divorce, one party is outraged to find out that the ex-spouse’s delayed or missed payments are listed in both their credit reports. If that happens, it may be too late to erase the damage. It is advisable that divorce parties contact creditors to close accounts or have the booted name agree in paper for the action immediately after the decree.

5. Someone can be paid to repair or fix bad credit record.

You can always check your credit record to see if there is any mistake on the reporting. It is easy to clear an erroneous data posted on your account, like a car repossession that never happened in the first place. But if you actually made delayed payments for several months on your credit card account, that may not be sanitized as it is already a hard fact. Do not easily believe parties that offer services to instantly fix and repair your bad credit. No one can fix it but yourself and it may take time and more effort on your part.

Andrew is a personal finance blogger with a passion for debt management. Over the last 4 years, Andrew has written numerous articles on consolidation loans, debt relief and budgeting.

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Tags: credit counseling, Credit history, Credit rating agency, Credit score, Debt

Category: Credit