ICFE eNEWS #16-25 - August 5th 2016
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The Top 10 Credit Report Myths Debunked

By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors

To have misunderstandings about our credit report can result in lower credit scores and higher interest rates. Therefore, it pays to get it right!

  1. Credit Reports Are Expensive And Hard To Obtain. You can get a credit report from each of the three credit reporting companies once a year absolutely free at AnnualCreditReport.com.
  2. Checking My Credit Report Hurts My Credit Score. Checking your own credit report is called a "soft inquiry" and can be done as often as you wish without negatively affecting your credit score.
  3. Unless I Know There Is A Problem, There Is No Reason To Check My Credit Report. Checking our credit report yearly can prevent credit problems the same way checking our oil or tires can prevent car problems. The Federal Trade Commission reports that 1 in 5 Americans has an error on his credit report, and 20% of those who find an error will see their credit score increase. So, check your report once a year.
  4. Getting Married Will Merge Our Credit And Create A "Joint Credit Report." Not so. Both partners will continue to have their own individual credit reports and scores. Any "joint" accounts will appear on both reports, and the management of those accounts will affect both partners' credit scores.
  5. One Cannot Have A Good Credit Score Without Maintaining Balances On His Accounts. Credit scores are not improved by carrying balances on accounts. Lenders are more interested in seeing that you pay your debts in a timely manner (35% of your score is based on payment history). Improve your credit score, without going into debt, by purchasing a small item on your credit card each month and paying it off in full when the statement arrives.
  6. Disputing Negatives On My Report Will Boost My Score. Any negative being disputed is noted as "disputed" on your report for 30-45 days. If you win the dispute, the negative item disappears forever and your score may increase. If you lose, the negative item returns. Thus, there is no long-term score increase simply because you dispute negative items. In fact, be careful not to dispute too many negative items at once or the credit bureau may throw out your claim as "frivolous."
  7. Becoming A Co-Signer Will Not Affect My Credit Score. Any debt for which you co-sign is just as much your debt as the person for whom you signed. Any default on that debt, and the credit score of both the signer and co-signer will be adversely affected, plus legal action can be taken toward both.
  8. Paying Off Negative Debts Removes Them From My Credit Report. Although paid off bad debts may not continue to adversely affect our credit score, the record of it having occurred can remain on our report for seven years before it drops off. Some credit reports will list a "drop off date" of those items listed.
  9. I Must Have A High Credit Score Because I Do Not Use Credit. Our credit score is tabulated from the history of how we have used credit during the past seven years. Lenders see that pattern of that usage as a predictor of future use. If we have no history of credit usage, we may be required to produce alternative proofs such as utility receipts, bank accounts, and assets to establish creditworthiness.
  10. Closing Old Accounts Will Increase My Credit Score. Doing so may inadvertently have the opposite affect since part of our credit score is based on the length of our credit history. Normally, the longer, the better.

Ask Mr. G
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023

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Sent by:
Paul Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE) - ICFE.info - 619.239.1401