Credit Repair Myths

There are lots of credit repair myths out there. I always say to be careful where you get your information from. Here are 10 myths that you should be sure to know the truth about!

Myth #1: Credit Repair Doesn’t Work This is completely not factual. Not only does it “work” but it can also turn lives around. However, a mind shift may be needed to keep the credit good once it’s there. Sometimes people need credit repair because they cannot control their spending habits, or they live above their means. Other times it was due to job loss or health issues. If it’s not a one-time circumstantial thing, then a mind shift may be needed to help you along the way. This is one reason that I recommend you checking out our other free courses to help you with your mind shift and budgeting. This can also be very time consuming. So for someone who doesn’t trust the process or has unrealistic expectations, it may seem like it doesn’t work. Myth #2: My Spouses info will be on my credit report This should not be the case. However, sometimes a name/address may appear if you have applied jointly for something. Also, if you have any joint accounts, the account will be on both files and if you are an authorized user on anyone else’s credit card, their credit card info will show on your file. Outside of these few scenarios, all accounts and information on your report should be your own. Myth #3: Credit Repair Companies are all a Scam This is not true. Don’t get me wrong, there are plenty of companies out there, that are scams. This is why if you are choosing to have a company repair your credit for you, that you thoroughly vet them. Do your research. Check their reviews. Not all credit repair companies are scams. Look for ones that have been around for a while. Be sure that they are not doing anything illegal, like creating a new CPN for you, or having you to apply for tradelines that aren’t yours. Even if you pay someone to repair your credit, who is doing illegal things, this can also land you in hot water. If it doesn’t feel right, keep looking until you find one that does. Myth #4: Following Dave Ramsey approach will improve my score! This can be very far from the truth. Unfortunately, he preaches that you do not need or want a credit score! This is great for the few people who are rich enough to not need help when purchasing anything. If you have enough money in the bank to purchase a home and a car, then maybe you aren’t worried about a credit score. But for the millions of consumers who don’t, we rely on credit to purchase many big ticket items. While the other things Dave Ramsey teaches are great such as saving money and paying off certain types of debt, if you don’t have a proper plan, you could be hurting yourself more than you’re helping.

Myth #5: Paying off all of your loans will increase your score This is also not true. You need to have different types of credit available on your report. This helps you by continuing to report on time payments to the bureaus and shows continued responsibility. If you close out your loans early, then you didn’t meet your required contract agreement. You also lose the payment history and the open account. Now your credit history has also been affected. Now, I’m not saying not to pay off that loan early to save the interest money. I’m just saying, be prepared for your score to drop some when you do this. It may be worth the trade off! Myth #6: Once something has been removed from your credit report, you no longer owe the debt This is generally false. If there was a balance before it was removed, then the debt is still there. If you settled out the account before or after it was removed, then you do not owe them anything. But if you got it removed with a balance, then they can still try to collect from you. Now, each state has what is called a Statue of Limitations, or SOL. This means, how long can certain types of debt be legally enforced? Please take a look at the attached spreadsheeet to see what the limits are for your state, as these do vary. Something can still be on your credit report with a balance, even though legally they cannot sue you for it anymore, as long as you truly haven’t paid them or settled it out yet. Myth #7: Once something has been removed from your credit report, it can never be added again This is also generally false. Unless the balance is $0, it can come back on once removed. So, if there is a balance when deleted, it can then be sold to a different collection agency and be put back on after they send you the dunning letter. If the balance is $0 when removed, it normally cannot come back on - especially not by a different collector. This is why it’s important to be sure to settle items out as they are deleted.

Myth #8: A collection cannot be on my credit report more than 1 time. This is somewhat true, but there is a caveat. A collection can only be on your report two times, as long as one is from the original creditor and the other is a collection agency or debt buyer. But the original creditor has to have a $0 balance in this situation. Both cannot report a balance due on the same debt. Also, 2 collection agencies may not report the same collection at the same time, no matter the balance. Myth #9: A credit score is a credit score. This is false. As you will learn, there are many different types of credit scores. You actually have over 50 different types of scores between all 3 bureaus! Myth #10: Checking your own credit report/score will cause your score to go down. This is false. As a consumer, you have a right to check your own credit report as often as you’d like. This will not affect your score at all. Having someone else run your score, like a lender or applying for a credit card, will drop your score a few points.