5 Myths of Bad Credit Report

Credit is nothing but debts or obligations you have assumed over time and what is your behavior towards them. Good or bad credit is determined by: payment experience, credit utilization, time you have had credit.

All information collected by the three credit bureaus (Transunion, Equifax, Expirian) determines your credit score. Theoretically, each agency may assign a different score based on the information collected. There are several myths and realities about having good or bad credit, and in this article we will guide you through five of the most common myths of having a bad credit.

5 Myths of Bad Credit Report

Myth # 1: Brush up on overdue debts (paying all at once for three months of overdue debt), I cleared the bad history in my credit report.

Fact: Installments of your debts are held in credit reports from all three agencies (Transunion, Equifax, Expirian) for a maximum period of seven years. Even if after a period of bad payment history you pay on time, in the case of mortgages, the history remains there for the entire life of the loan (10, 15, 20, 30 years or more).

Myth # 2: Your credit report can be “fixed”.

Fact: Credit reports cannot be repaired or fixed, they can only be corrected .

Myth # 3: Many companies offer me “fix or repair my credit” if I pay.

Fact: NO ONE has the legal ability to remove “genuine” data from credit reports. Federal law (Federal Credit Reporting Act) stipulates that consumers may apply, for free, to update their report, and this way errors can be removed in their credit reports. It is considered one genuine error when: delays are reported when actually paid on time, debts that are not yours, already settled balances etc are reported.

Myth # 4: After a bankruptcy, I can never apply for funding.

Fact: Yes you can get financing again as long as you can demonstrate that you have restored your credit, you have enough income to take on more debt and can justify why you had to resort to bankruptcy.

Myth # 5: If I endorse someone and he does not pay, it does not affect my credit.

Fact: Giving your “signature” for someone is the same as assuming his debt as if it was yours. If the debtor defaults, you as a “endorser” have the entire responsibility to pay and if you fail to do that, it will negatively affect your credit score. Payment arrangements or having had at to resort bankruptcy at one point does not mean that the world is finished for you. Instead, you must learn from the mistakes you made, so that when you start again you protect your credit and you don’t have to lose it again. When having bad credit we diminish our possibilities of obtaining financing and we may miss out on opportunities or we can even become less credible for others, but we must be aware that it is not the end. Next week in part two of this series, we’ll be talking about the five myths of having good credit.

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The first step in getting a good credit score is granting the credit bureaus access to your credit report. The credit score is also known as Empirical, Beacon Score or Fico Score, and is categorized as very good or excellent when it reaches 770 or more. A score below 650 means that you may have difficulties when trying to obtain a loan…

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