There are a lot of common misconceptions surrounding the credit repair process. Apprehension about making the wrong moves when it comes to trying to raise our credit scores or fix negative credit reports often cause many to take no action at all. In fact, many consumers fear that if the do anything they may make their credit score worse instead of better. And that fear is justified. A few wrong steps can significantly impact a credit rating -in ways never intended.
If you have bad credit and you're not sure what the right course of action is for you, then below are some of the more common credit repair myths busted.
Myth: If I file bankruptcy, my credit will be wiped clean..
Fact: Bankruptcy is the single most damaging entry you can have listed on your credit report. It's also not just listed as a single entry. Every single account, credit card, loan or other outstanding debt you have tried to 'wipe clean' will be suddenly listed as 'included in bankruptcy' instead.
Aside from reducing your score to really low levels, when lenders or new creditors see these kinds of listings, they already know you have a history of being unable to repay your debts. On top of this, even your bankruptcy discharge listing will be displayed on the court records section of your credit report.
The easiest way to repair credit is to avoid bankruptcy and work on positive methods that will put you back on the right track. However, if you are drowning in a sea of debt, bankruptcy may be the right and often only move to put you back on the right track. Always consult with an experienced bankruptcy attorney.
Myth: If I change my Social Security numbers, I can get a new credit report.
Fact: This kind of credit repair scam was rampant a few years ago. The theory behind this myth is that you create a new identity by either using a fake Social Security number or perhaps even by using an EIN tax number.
When you apply for new credit using this falsified information, the idea is that you should have a clean slate.
Unfortunately, this doesn't fix your existing bad credit report and you also create a whole new set of problems to go with it. Using false personal information in order to obtain credit is a Federal offense.
If any credit repair company suggests that you create a new or false Social Security number, avoid them at all costs. You should report companies promoting this kind of scam to the FTC immediately.
Myth: If I want to fix bad credit, all I have to do is dispute negative listings on my credit report.
Fact: If your credit report contains any errors, such as old accounts that should have been removed, erroneous data that should never have been reported in the first place, you can dispute the listings with the credit reporting agencies. The removal of inaccurate information may increase your score. However, you can't remove accurate listings legally.
If you have a history of late payments and delinquent accounts, then these listings will remain on your file for 7 years -no matter how hard you try to dispute them. The best way to repair bad credit in this situation is to work on ways to catch up your past due accounts. Late payments are very damaging to your credit score.
Consider rolling some of your credit cards into a debt consolidation loan to help reduce your interest rates and lower your repayment amounts. This may help you to budget more easily, as well as get rid of those outstanding debts. Ask your creditors to list them as paid in full and then concentrate on paying down your consolidation loan with timely repayments.
Myth: If I cancel credit cards that contain a derogatory history, my credit score will increase.
Fact: Canceling credit cards will not raise your score or remove a bad credit history. . You can cut up your card -but the moment you cancel the card with the credit issuer, you also reduce any available credit on that card and that move in itself, can cause your score to drop significantly.
Myth: It's easier to pay a debt I don't owe, just to remove or avoid it from being on my credit report.
Fact: The short answer is, no way! By paying a debt you don't owe -it's tantamount to acknowledging the debt is yours. And once you do so, that derogatory listing you were trying to avoid can legally remain on your credit record and affect your score for years to come. Know what your rights are when it comes to fair debt collection practices.
Myth: If I negotiate for debt settlements with my creditors, I'll fix my bad credit.
Fact: Debt settlements could potentially help to reduce the total amount you owe your creditors. The object is to negotiate with your creditors until they agree to accept a reduced amount of money to represent payment in full for your outstanding debts.
Some people successfully negotiate to have their penalty interest payments and overdue fees waived, which helps to reduce the amount they owe. Most creditors will ask you to enter a payment arrangement, where you pay an agreed amount of the new amount you owe until it's paid off. If you miss one of those payments, the damage to your credit could be worse than before you started.
When you consider the total calculations used to work out your credit score, you'll note that your repayment history accounts for a full 35% of your total score. This means you'll have more success with repairing bad credit if you work out a way to catch up any past due payments and begin making timely repayments on other debts on your own.
There are plenty of positive ways to repair bad credit without succumbing to the many debt relief scams, myths and so-called quick-fix credit repair solutions that can often make things far worse. Be patient -overtime your credit will improve and so will your awareness on how to keep it that way.
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If you have bad credit and you're not sure what the right course of action is for you, then below are some of the more common credit repair myths busted.
Myth: If I file bankruptcy, my credit will be wiped clean..
Fact: Bankruptcy is the single most damaging entry you can have listed on your credit report. It's also not just listed as a single entry. Every single account, credit card, loan or other outstanding debt you have tried to 'wipe clean' will be suddenly listed as 'included in bankruptcy' instead.
Aside from reducing your score to really low levels, when lenders or new creditors see these kinds of listings, they already know you have a history of being unable to repay your debts. On top of this, even your bankruptcy discharge listing will be displayed on the court records section of your credit report.
The easiest way to repair credit is to avoid bankruptcy and work on positive methods that will put you back on the right track. However, if you are drowning in a sea of debt, bankruptcy may be the right and often only move to put you back on the right track. Always consult with an experienced bankruptcy attorney.
Myth: If I change my Social Security numbers, I can get a new credit report.
Fact: This kind of credit repair scam was rampant a few years ago. The theory behind this myth is that you create a new identity by either using a fake Social Security number or perhaps even by using an EIN tax number.
When you apply for new credit using this falsified information, the idea is that you should have a clean slate.
Unfortunately, this doesn't fix your existing bad credit report and you also create a whole new set of problems to go with it. Using false personal information in order to obtain credit is a Federal offense.
If any credit repair company suggests that you create a new or false Social Security number, avoid them at all costs. You should report companies promoting this kind of scam to the FTC immediately.
Myth: If I want to fix bad credit, all I have to do is dispute negative listings on my credit report.
Fact: If your credit report contains any errors, such as old accounts that should have been removed, erroneous data that should never have been reported in the first place, you can dispute the listings with the credit reporting agencies. The removal of inaccurate information may increase your score. However, you can't remove accurate listings legally.
If you have a history of late payments and delinquent accounts, then these listings will remain on your file for 7 years -no matter how hard you try to dispute them. The best way to repair bad credit in this situation is to work on ways to catch up your past due accounts. Late payments are very damaging to your credit score.
Consider rolling some of your credit cards into a debt consolidation loan to help reduce your interest rates and lower your repayment amounts. This may help you to budget more easily, as well as get rid of those outstanding debts. Ask your creditors to list them as paid in full and then concentrate on paying down your consolidation loan with timely repayments.
Myth: If I cancel credit cards that contain a derogatory history, my credit score will increase.
Fact: Canceling credit cards will not raise your score or remove a bad credit history. . You can cut up your card -but the moment you cancel the card with the credit issuer, you also reduce any available credit on that card and that move in itself, can cause your score to drop significantly.
Myth: It's easier to pay a debt I don't owe, just to remove or avoid it from being on my credit report.
Fact: The short answer is, no way! By paying a debt you don't owe -it's tantamount to acknowledging the debt is yours. And once you do so, that derogatory listing you were trying to avoid can legally remain on your credit record and affect your score for years to come. Know what your rights are when it comes to fair debt collection practices.
Myth: If I negotiate for debt settlements with my creditors, I'll fix my bad credit.
Fact: Debt settlements could potentially help to reduce the total amount you owe your creditors. The object is to negotiate with your creditors until they agree to accept a reduced amount of money to represent payment in full for your outstanding debts.
Some people successfully negotiate to have their penalty interest payments and overdue fees waived, which helps to reduce the amount they owe. Most creditors will ask you to enter a payment arrangement, where you pay an agreed amount of the new amount you owe until it's paid off. If you miss one of those payments, the damage to your credit could be worse than before you started.
When you consider the total calculations used to work out your credit score, you'll note that your repayment history accounts for a full 35% of your total score. This means you'll have more success with repairing bad credit if you work out a way to catch up any past due payments and begin making timely repayments on other debts on your own.
There are plenty of positive ways to repair bad credit without succumbing to the many debt relief scams, myths and so-called quick-fix credit repair solutions that can often make things far worse. Be patient -overtime your credit will improve and so will your awareness on how to keep it that way.
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