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Learn From 5 Common Credit Reporting Myths

Learn About Credit ReportMyths are part of our culture and something that most of us are familiar with in one form or another. Tap. Tap. Tap. What comes to mind? Throw in a car that is out of gasoline, a dark stormy night and an escapee from an asylum. Where is your mind now?

Some myths, or urban legends, span continents and we tend to accept these stories as truths because they come from the often trusted source: a friend of a friend.

Common credit report myths

Your credit report is a collection of information about you, your borrowing and repayments. But like the familiar tale above, the facts you think you know about credit reporting may be more akin to myth.

1. I don't need to check my credit report because I pay my bills on time.

You may very well pay your bills on time, but does your credit report accurately reflect this?

Credit reports contain errors and since your next loan, credit card application, or new house might depend on the information contained within your credit report, isn't it worth checking?

The types of errors most frequently found involve:

  • Personal information
  • Late payment information
  • Inclusion of accounts that are not yours

You are entitled to an annual credit report check and, if you do find errors, the Fair Credit Reporting Act established steps you can take to correct them.

2. Requesting my own report will count against me.

Nope. A finance company can request your credit history to aid their decision as to whether or not to provide finance to you. This is known as a hard inquiry. When you request your own report, this is recorded as a soft inquiry and will not count against you.

3. The number of inquiries on my report will count against me.

Like the best myths, the roots of this one are buried deep in times gone by. Credit agencies are aware that consumers shop around for the best-priced finance in the same way that they do for other goods and services.

If several related inquiries (for example, several different mortgage inquiries) are submitted in a 30-day period, then a spate of inquiries on your credit report will show you as nothing more than a savvy, price-conscious shopper.

4. All credit reports are the same.

Again, not so. The three credit bureaus (TransUnion, Experian and Equifax) collect the same data, but in a different manner and at different times. The way in which the data is presented will also be different.

Moreover, each of the three bureaus uses inquiries as triggers to obtain updated information. So if, for example, you recently moved and received financing from a particular lender who requested a credit report from only one bureau, only that bureau would now have your updated address. The data held by the remaining two bureaus would no longer be current.

5. My credit report only shows 7 years worth of data.

It can be up to ten years actually. If you reorganize your debt under Chapter 13 bankruptcy, the details should no longer show after seven years. If you entered Chapter 7 bankruptcy, the details will continue to show for ten years. In both cases the details should automatically fall from your credit report at the end of the allotted time, but as this does not always happen, it is worth checking.

On a more positive note, where accounts have been closed or settled without mishap or delinquency, the information will remain on your credit report for ten years, thus extending the benefit of your well-managed debt.

Some myths set out to scare us and being scared, in the right circumstances, can be great fun! But when we labor under misconceptions, the results might not be quite so thrilling. Take the time to check your credit report now, it's quick, easy and shouldn't give you a fright.

 

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