EXPOSED. What the credit bureaus don't want you to know. Part 2...

 Picking up from yesterday---

And just when you thought it was safe to relax, the next piece of shocking news hits the press-85% of the U.S. population has an error on their credit report. Yet do you think your creditors take this into account when they’re looking at your credit file? Absolutely not! You are guilty until proven innocent! You have no chance to confess or deny a blemish on your credit report before it hits the airwaves and goes out to all of your creditors, and you have to prove, beyond a shadow of a doubt, that the information on your file is incorrect before they will remove it! How do you like that?

The credit bureaus are in business to make money, and because of that they’re going to post your credit information for your creditors (who pay them to see it) before you can do a thing to stop the process. It’s your credit, but you don’t fit into the credit system at all!

Ten Favorite Myths About Your Credit Report

Now that you’ve been introduced to the credit system you’re probably ready to throw your hands up in the air and call it a day. Don’t do that quite yet. It is possible to fix the little blips on your credit report, but there are a few things you need to know first. Let’s start by debunking the ten most common myths you hear about your credit report.

Myth #1: Credit Bureaus are empowered with some kind of governmental authority.

Fact: Credit Bureaus have no legal authority at all. They aren’t a government agency, just a private company in the business of selling information.

Myth #2: The credit bureaus are required by law to keep derogatory items on your credit report for 7 to 10 years.

Fact: There is no law requiring the credit bureaus to report anything on you at all. There is, however, a law known as the Fair Credit Reporting Act that requires these companies to remove all derogatory items older than 7 years. (10 years in the case of bankruptcy).

Myth #3: Some types of negative listings, such as bankruptcies and foreclosures, are impossible to remove.

Fact: Like we mentioned in Myth #2, everything comes off your record sooner or later. There is no type of negative listing that hasn’t been removed from a credit report thousands of times. Some black marks might be harder to erase than others, but that has more to do with the way the credit bureaus work than with the actual problem.

Myth #4: The information on your credit report cannot be changed.

Fact: It is REQUIRED that items that are too old, are inaccurate or cannot be verified in a timely manner be removed from your credit report under the Fair Credit Reporting Act.

Myth #5: It is illegal or immoral to have the information on your credit report altered or removed.

Fact: Okay, who started this one? If you can’t have your information changed, what’s the point of having the Fair Credit Reporting Act in the first place? You ABSOLUTELY can change the information on your credit report! If you couldn’t you would be completely at the mercy of the credit bureaus. What a disaster that would be.

Myth #6: Paying a past due debt removes it from your credit report.

Fact: Paying an old debt doesn’t change or erase the fact that at one time you weren’t paying on it as you had agreed. Fortunately, this can be changed.

Myth #7: Inquiries are not derogatory and will not affect your credit standing and score.

Fact: Anything that erodes your financial credibility is going to hurt your credit standing. One or two inquiries aren’t going to hurt you (fortunately, since it seems like everyone wants to check your credit report these days), but more than that make it look like you’re desperate for credit-and your creditors are going to want to know why.

Myth #8: If you get a derogatory item removed, it will just come back.

Fact: This one has been cleverly and slyly spread by the credit bureaus through the media and government regulators (at least, the ones who don’t know any better). The truth is that the credit bureaus will temporarily delete a negative listing if they haven’t heard back from the credit grantor after approximately 30 days. If the credit grantor is slow reporting, but eventually reports that yes, the negative listing is correct, the credit bureaus will reinsert this. This is a process known as a soft delete.

Remember, however, that you can challenge a listing on your credit report at any time. The responsibility for keeping the information on your credit report accurate and up to date is completely on you, as the consumer.

Myth #9: Disputing your report is easy, and any consumer can do it himself for the price of a few postage stamps.

Fact: Yes, disputing your credit report is easy. Courtesy of the Internet, you don’t even have to pay for your stamps-the major reporting agencies will let you do it from their site for free! Getting results, on the other hand, is amazingly difficult, complex and infuriating. The Federal Trade commission gets more complaints per year about credit bureaus than any other business in the United States. This isn’t a coincidence!

Myth #10: When I pay off a past-due account, such as a charge off or collection, it will show paid and will no longer be negative.

Fact: This is a Catch-22 of epic proportions. It is practically impossible to restore your credit without somehow satisfying your outstanding debts, but paying off a debt actually hurts your credit more than it helps it. Negative credit is allowed to stay on your credit report for a maximum of seven to ten years, a clock that starts ticking on the date of the last activity on that account!

Let’s say that you have an outstanding medical bill from six years ago that you finally pay off. You think that it should be coming off of your credit report…it’s paid, and your seven year deadline is coming up. You’re safe either way, right? Wrong. The day you pay off that bill you reset the clock. That means seven years from the day you pay that bill off it’s going to be sitting on your record. That black strike will be against you for thirteen years! Unfortunately, it doesn’t always pay to be honest. If you have outstanding debt it is almost always prudent to seek professional help to settle your debts without further damaging your credit.

Rebuilding your credit after one of life's catastrophes can be time consuming and expensive.  Make sure you thoroughly understand how the credit clock works.  Sometimes it just isn't worth it to be a stand up person.  Later in this series we'll discuss statutes of limitations when it comes to collecting and this will make better sense.

I'll be taking the weekend off.  On Monday we'll pick up right here with Part 3 and learn exactly what a credit report is...