Busting Popular Credit Repair Myths
This article sets out to bust popular credit repair myths. It is not uncommon for most people to worry about the state of their credit scores. At Better Credit we understand this concern and thus provide additional education to ensure you remain well informed.
Myth #1: Bad Credit Means You’re Irresponsible
Typically, if you’re faced with bad credit, it could be one of two things. First, your credit may be poor because of a past foreclosure or missed payments. Yet it is also common to have a low credit score because of identity theft or errors on your report that bring down your scores. Any of these scenarios, could imply you’re “irresponsible” however, without further research, the report is deceptive.
Let’s dive a bit deeper. If you’ve been “black-listed” as having poor credit, you’re not alone. Banks who understand financial reports can generally spot errors however, it’s not their responsibility to inform you of these errors or even provide you with better rates if you need financing. These “blacklists” are what financial institutions check to verify your creditworthiness.
If you suspect you’re on this list, we advise you contact a credit repair company immediately for help. A good credit repair company will asses your current credit report, scan it for any errors and then work diligently to remove these errors to increase your credit scores.
Credit repair companies are one of the best ways to save time and clean up your credit report.
Financial setback, especially those that are unexpected can be stressful and significantly interrupt your financial reputation. Our clients face high medical bills and unexpected corporate or land taxes. These debts can get out of control and suddenly multiply if interest rates are applicable.
If you suspect identity theft plays a role in your low credit score, contact the lender as soon as possible and file a dispute. Be mindful that each time you need to file a dispute, keep track of each person with whom you speak as well as all of the number they give you. All fraudulent cases are dealt with promptly.
It’s wise to understand how credit bureaus calculate your credit score. This is generally unchartered territory and confusing for most people. Each time you apply for a new line of credit, the issuer looks at your overall credit score to decide how much you can manage to payback. The calculation comes up with a reasonable amount of money they can lend. The catch is, whether you are approved or not, your score is still “dinged” or flagged for a couple point deduction.
Myth 2: Credit Ratings are Accurate and Fixed
As we discussed a bit earlier, lenders make mistakes and credit reports aren’t always accurate. There are billions of people on the planet most of whom use financing in one form or another. Not to mention humans are required for data entry from time to time so there’s is plenty of room for errors. Once errors are fixed, your credit score will improve busting the myth that credit scores can’t change.
Myth 3: There’s a Secret Shortcut
There are rarely shortcuts in life and the same applies with your credit history. Bankruptcies and delinquent loans are removed by the lending company after a 7 to 10 year period. Credit repair companies like Better Credit work on shortening this time and the improvements to your credit score happen from following up with your issuers to remove the red flags from your report. We are able remove errors as well which improves your credit score quickly. While there are no shortcuts, there are ways to boost your credit score that involves consistent communication with your issuers as well as with collection agencies.
Myth 4: Here Today, Gone Tomorrow
Strict rules and regulations established by The Credit Repair Organizations Act (“CROA”) regulates the credit repair industry. This prevents companies from illegally charging customers without providing assistance and improving their credit. This regulation allows legitimate companies like Better Credit to work with you and on your behalf to provide you with results.
Credit scores inform lenders on the way you manage money and debt and indicate your likely willingness to make payments on-time. It is not the end of the world if your credit isn’t perfect, few people have an exceptional score above 800. For this reason, Better Credit is here to make a positive impact on your life and on your credit score.
Myth #5: Opening Several Lines of Credit Improves Your Credit
Multiple lines of credit on your credit report shows that you have an active credit history. Several financial responsibilities of loans, bills and mortgages does not mean your credit score will improve with each new account you open. The truth is that the more accounts you have open, the more likely defaults will occur. Of course lenders consider your income and assets before offering financing, however their prediction of what you can afford to repay is distorted with every new account.
Therefore take caution when applying for additional credit if your score isn’t above 750. Shop around for the right line of credit. Call them and ask multiple questions about their rates and terms. Most of this information you’ll find on their website, however if you are uncertain, speak with their customer service department before you apply for a new card.
Myth #6: Closing Credit Cards Improves Your Credit Score
This is a common myth and one we like to bust. What typically happens with you close a credit card is the card issuer will submit a new report to the three major credit bureaus and your overall score is readjusted based on your open lines of credit and how much you owe on them.
So if you have 4 other cards in active use instead of 5, the percentage of available funds on each card is recalculated and a new credit score is provided. This score may be higher or lower depending on your debt to credit ratio. If you have a high balance on the remaining cards and a low balance on the card you recently closed, your credit score will reflect this and your score will likely drop a few points.
Due to this closing accounts readjusts the length of time you had active credit with that issuer and this is a major indicator of your credit score. It may be benefit your score more to pay off the credit card and leave the account open.
We hope that the myths we’ve busted provides insight on your available options. Should you need immediate assistance boosting your credit score, contact us today.
