Your credit report. It’s a big deal these days.
There are many rumors and misconceptions surrounding the subject of how to deal with credit issues, and the driving force behind consumer reporting agencies.
Many people make mistakes in their lives that put them in a difficult financial situation, and at these times drastic measures may be needed to get back on track.
Consumer Reporting Agencies Are Not Your Friends
The three main reporting agencies, Experian, Equifax, and TransUnion are not government agencies.
They are required to follow laws written by Congress, but there is virtually no reinforcement of these laws.
The credit reporting agencies are not your friends.
They “double dip”, meaning they make money off both the consumer and the companies that report to them.
When a negative item shows up on your report, they get paid to release the negative information to your current, and possibly future, creditors.
They have absolutely no interest in removing the negative items, whether they have expired or they are incorrect.
It is your right to contest incorrect or expired items on your consumer report, but keep in mind that the credit reporting agencies will give you the run around, making it very frustrating and difficult to accomplish.
If you need to contest items on your report, make sure you keep copies of everything you have done and remain diligent. After being pushed to your patience limit more than a few times, you will accomplish it. But realize it’s not going to be fun.
Credit Reporting Agency Myths
Myth: If You Pay a Bad Debt (or late bill) It Will Be Removed from Your Credit File
This is by far the most common myth when it comes to credit reporting agencies, or your credit score. Many times, an unethical bill collector will encourage this myth.
The thought goes that if you pay off or pay current a past due bill or one that is in default and has gone to collections, the negative information will be removed from your consumer report.
In fact, there is no such guarantee, and any creditor who claims such a thing should be forced to back it up in writing.
Truthfully, even if you get it in writing, it can still be a difficult and frustrating commitment on your part to get the negative information removed.
As sad as it sounds, there is no difference in the credit world between a bill of $10,000 that is 2 years overdue and went to collections, and that same bill when it is finally paid in full.
(That is not to say that you shouldn’t pay off your creditors, only that it will have no effect on your credit score or report.)
Myth: It’s Illegal to Repair Your Credit
Another false rumor states that it is illegal to try and repair your credit; again, this is untrue. There are legal ways to get incorrect and out of date negative items removed, and you can strike written, signed deals with creditors for settlements that include adjustment of your report initiated by the creditor.
Again, just because you have something in writing, it doesn’t mean you don’t have to be perseverant in following up with both the creditor and the credit reporting agency. It just means you have the proof needed on your side.
Credit reporting agencies have a vested interest in listing negative items in your report – remember, they get paid for it by the loan companies!
Unfortunately, they don’t check to see if the information is accurate, and they have no reason to go to the trouble of removing data that is false or out of date. Bad items can stay on your report for 7 years or more if you do not take action to have them removed.
Myth: Credit Agencies Must Keep Negative Information on Your Report for 7 Years
This is simply not true. If you have incorrect information on your report, or you have an agreement with a creditor to remove an item, then you legally have the right to have negative credit information removed from your file.
Another point worth mentioning, the 7 years starts from the last time you have made contact with the original creditor or the collections agency they sold the account to. This means that if you’ve had a bad debt on your report for 5 years, and you contact the bill collector to get it resolved, the credit reporting agency will attempt to restart your 7 year cycle.
Also, keep in mind that the credit agencies will usually attempt to keep negatives on your report for more than 7 years, too. If you find this, you can request to have it removed.
It should be mentioned that positive credit and good debts will remain on your report forever.
Myth: You Have to Sign Up for Credit Monitoring Service to Get a Free Consumer Report
It is up to you, the consumer, to request copies of your reports each year and verify that your information is correct.
You are entitled to a free credit report from each of the credit reporting agencies, TransUnion, Experian, and Equifax, once per year. You do not have to sign up for any monitoring service in order to receive these reports.
There are some scams out there that will try and trick you to convince you that they offer you a free consumer report, most notably FreeCreditReport Dot Com (DO NOT GO THERE). They will sign you up for an expensive and basically useless credit monitoring service.
The best place to go to request the free reports that you are entitled (with no strings attached) is
Annual Credit Report.
If you are interested in obtaining your credit score (not your report) from the consumer credit agencies, they will charge you a fee for that.
For more myths about credit reporting agencies and reports check out Young Money.
The best way to repair your credit starts with vigilance. Track your expenses, mange your debt, pay your bills on time – and double check your report yearly to ensure your activity is being properly documented.
Look at your situation from a long term standpoint, and plan accordingly; with diligence and hard work on your part, even the worst credit will eventually show improvement!