Misconception #1: “Personal information cannot be deleted from a credit report.”
Fact: Even if it’s a bankruptcy, any credit information that is not 100% complete, exact, or verifiable can be erased from your credit profile. This has been the case since passage of the Fair Credit Reporting Act, a federal law decreed by Congress in October 26, 1970 that allows you to dispute any inaccurate information on your credit report with the party that reported it. When you file a dispute, the furnisher must re-investigate the dispute and if the information is found to be inaccurate, incomplete, or can no longer be verified, they must permanently delete it from your credit file.
Misconception #2: “Payment history makes up your consumer credit score.”
Fact: Many people believe that the “payment history” is what makes up their credit scores. But, your bill paying habit only makes up 35% the scoring. A second category, the “debt-to-credit t ratio” (the ratio of the account balance to its credit limit), makes up another 30%. A third category, “length of credit history” (the age of your accounts), makes up 15%. A fourth category, “number of hard inquiries” (new credit applications), makes up 10%. Finally, the “diversity of accounts”, such as revolving accounts (credit cards) and installment accounts (student loans; auto loans) makes up the remaining 10%. Thus, all five categories weigh in on your final numeration.
Misconception #3: “You have only one consumer credit score.”
Fact: Each credit bureau assigns you a different credit score, each ranging from 300 to 850 points. Equifax uses the BEACON score, Trans Union uses the EMPIRICA score, and Experian uses the FICO score.
Misconception #4: “Paying off collection accounts improves your credit.”
Fact: Paying off a collection account can actually hurt your credit. This automatically resets the account’s required seven year reporting period from the date of last activity or when the account was paid. Essentially, if the collection account only has one more year to remain on your report, as soon as pay it off, it renews the reporting period giving you 7 more years of bad credit.
Misconception #5: “Closing inactive accounts and opening new accounts improves your credit score.”
Fact: The length of your credit history contributes to 15% of your score. Thus, the older your accounts, the higher your points. And your account must be open a minimum of 12-months in order to be scored. So, rather than opening a new account, you should “activate” inactive accounts and begin making credit purchases on them. This activity will also improve your payment history, a category that makes up roughly one third of your credit score.
Misconception #6: “All credit inquiries hurt your credit score.”
Fact:There are two types of credit inquiries, “soft inquiries” and “hard inquiries.” Soft inquiries are inquiries made by creditors, landlords, or employers. These inquiries do not affect you. However, when you submit an application for credit and the creditor requests a copy of your report, you are making a “hard inquiry, which will affect your scoring. Making too many hard inquiries within a proximate timeframe can hurt your future opportunities to obtain loans.
Misconception #7: “A bankruptcy filing must appear on your credit report.”
Fact: Contrary to popular belief, federal and states courts are not required to report any type of public record. A bankruptcy would only appear on your consumer credit report because the credit bureau sent an employee or independent contractor to the courthouse to gather the public record. The good thing is that credit bureaus generally report inaccurate information that you can delete through the dispute process.
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