3 Credit Myths – Don’t Be FooledMarch 22, 2018
Across all media platforms today you will find credit myth information on almost any topic or subject, but sadly, much of the information concerning credit is inaccurate.
Here are some common credit myths being thrown about:
Credit Myth 1: “Multiple credit inquiries will hurt your score, each and every time.”
In older Fair Credit Reporting Act (FCRA) models, inquiries had a greater effect on your score because they counted every inquiry for automotive and every inquiry for a mortgage. So if you were shopping around for the best deal on an auto loan, or shopping around for the best deal on a mortgage, your credit score got dinged for each one.
The FCRA models realized that this was discouraging intelligent consumers from getting the best deal, so they adjusted the model to only count automotive and mortgage inquiries that are done within a certain period of time to be counted as one single inquiry.
Credit Myth 2: “It will take you seven years to improve your credit.”
This is one of the widespread credit myths. In actuality, it’s an ongoing process to improve one’s credit. It doesn’t take a certain amount of time. Most negative items will remain on your credit report for up to seven years, as long as they are accurate, can be verified, the credit bureau and creditor reporting the item can and will provide the appropriate validation of the debt and the debt actually occurred within that period of time being reported.
Of course, many items are NOT accurately reported and are not verifiable, therefore they can and should be removed.
Regardless of whether or not individual line items can be corrected or deleted, though, you can start to improve your credit. It can be done by maintaining a positive payment history, maintaining lower balances, and low utilization rates on your credit cards. It can also be done by establishing new accounts to get your new payment history going smoothly again.
Credit Myth 3: “A serious financial crisis like a foreclosure or bankruptcy permanently hurts your credit score.”
Foreclosures will remain on your credit report for seven years, Bankruptcies can linger for seven to ten years: this is entirely dependent upon how the bankruptcy gets filed. Chapter 13 will remain for seven years, whereas Chapter 7 will remain for a decade. Note, however, that the actual bankruptcy in the public records section will remain there for ten years either way.
One must remember that the reporting of a Foreclosure or Bankruptcy on a credit report must meet the same criteria that any other item must meet in order to stay on a person’s credit report and that is that all reported information pertaining to that foreclosure or bankruptcy be reported accurately and be able to be verified and validated by both the party reporting the item and the party recording the item.
Absent of that verification and validation the item must be removed from the credit report regardless of when it originally took place.
The important take-away point is that although these are certainly long periods of time, it’s not permanent, and there are many things you can do after a financial crisis to reestablish your credit and get your credit back on track.
These are just a few of the Credit Myths you find today reported online, on TV, and published on Social Media and other news outlets. Don’t be fooled, you can take control of your financial and credit future by handling your current finances responsibly and demanding your rights under the law that ALL information that is being reported about you be 100% accurate 100% of the time.