Credit Report Myths - Get the Facts!

Author: Jay Neel

Credit Reports, what are they? Do you know that whenever you apply for any loan, your credit report is pulled up from the Credit Bureau?

Well, credit bureaus maintain your credit report. They have almost all the agencies or vendors or suppliers or traders as their subscribers. Are you asking what does this mean? Well whenever you apply for a credit card, your application becomes the part of your credit record. All the basic information supplied by you e.g. your name, date of birth, address, Social Security Number etc, become the foundation of your credit score card.

Can I get access to my credit history? Can I check what these agencies have been reporting to credit bureaus?

Yes, you have all the rights to get a copy of your credit history from any credit agency. Also keep in mind that we all are entitled to one free report per year if we are not in hurry and can wait for the report through mail. I think everyone should get one report every year.

While writing about these type of articles, I have often received few emails asking variety of questions on issues related to their credit. Most of the time, I noticed that I can group these questions in five groups. I hope that by sharing answers to these five questions, I can help my readers in USA and Canada better.

Myth#1: The Credit Bureaus are required to keep derogatory remarks on my credit history for 7 to 10 years as per the law.

Fact: Is it true? The big answer is NO. Let me repeat for the benefit of the readers from USA and Canada that there is no such law. In fact the credit bureaus are required to automatically remove any such remarks from your credit report every few years as per the law. Normally for each province or state, these number of years when record is removed, is different.

Myth#2: My friend said that it is illegal to remove any credit history information or alter any credit report information in the file.

Fact: The purpose of the law is to protect consumers from any type of intrusions from any credit bureau. You should also keep in mind that it is our right that we interact with these agencies and get any misinformation or misleading record fixed.

Myth#3: If I pay my past due debt, then my credit history will be fixed immediately.

Fact: First of all it is always good to pay back to any creditor in time. If you are late, then you should communicate back to creditors sharing with them why you need more time. In majority of the cases, if you are honest and reasonable, your creditors will help you because their objective is to get the money back even if you are late. By paying your past debt, you reduce your number of days of the 'debt in delinquency' record. This means that your record can be improved early if you paid early.

Myth#4: Any type of inquiries are not harmful to my credit score so I can keep shopping around for credit cards or any other such credit products.

Fact: If there is a normal frequency of the credit inquiry, it is not harmful. But if you shopping aggressively for mortgage or any other such product, then it can impact your credit standing. So be very careful for any such inquiries and you should go to mortgage consultants who do shopping for you based on only one inquiry. If you go to different service providers, then each mortgage service provider will request for an inquiry which will hit your credit records.

Myth#5: Bankruptcy can not never be taken out from the credit records.

Fact: Bankruptcies are similar to any other derogatory items e.g. bad credit, poor credit, non-payment of a debt, etc. on your credit reports. You should always consult a lawyer or a consultant before you consider announcing bankruptcy. That consultant will guide you by sharing all the pros and cons of taking that action.

You should keep in mind that credit bureaus are there for a very specific reason. Their main job is to provide a credit rating to the bank about you so that the bank will know whether you are a safe customer or not. And last but not the least, credit bureau provides you a similar coverage if you are a business man.

So in summary, you should consider your credit report as your life score card and keep a close eye so that you keep winning all the matches in your life.