Credit Report Myths & Facts

Credit scoring formulas keep changing regularly and it is hard to keep track of the changes and factors involved in credit scoring. Similarly all lenders look at different things on your Credit Report and almost all lenders have different policies. So it is really hard to guess if you will be accepted for a loan. But there are some things that might help you understand how to treat your Credit Report. Here are some myths and facts about Credit Reports.

Myth: A bad Credit Score will decline me from all sorts of credit/loans.
Fact: Your credit and Credit Score plays a major role in deciding whether or not you will get the loan/credit you need. But lenders also look at a number of factors such as your income, your work history and your current assets. After analyzing this information the lenders may lend you a loan even if you Credit Score is bad or sometimes even decline your loan if you have a good Credit Score.

Myth: Negative information on Credit Report stays forever.
Fact: Negative information (such as late payments) will affect your Credit Score but the effect declines over time. Usually negative information stays on your Credit Report for 7 years (bankruptcy for 10 years and criminal convictions stay on indefinitely). So information (other than bankruptcy and criminal convictions) older than 7 years should have no or very minute effect on your Credit Score.

Myth: Gender, race, nationality and marital status affect the Credit Score.
Fact: Credit score does not factor in any non-financial information. So gender, race, age, nationality and marital status do not affect the Credit Score. Moreover, the Equal Credit Opportunity Act prohibits lenders from factoring such information when issuing a loan or a credit.

Myth: Inaccurate entries on my Credit Report cannot be disputed.
Fact: Everyone has a legal right to dispute any information on their Credit Report that they feel in inaccurate. The credit bureau then has 30 days to resolve a dispute. If the credit bureau cannot prove the dispute to be incorrect they have to remove the information from your report. You can either dispute by the credit bureau’s website or by postal mail. Every credit bureau is different so check your report from all the three bureaus and dispute the information with the bureaus individually. It is recommended to keep a copy of you communications so it is best to use postal mail.

Myth: Getting a copy of my report will affect my Credit Score.
Fact: There are two types of inquiries. When you pull your Credit Report it is known as a soft inquiry. When a lender pulls out your Credit Report (for ex when you apply for credit card or buy a new car) it is known as a hard inquiry. Soft inquiries have no effect on your Credit Score. Hard inquiries can affect your Credit Score exponentially. Exponentially means that a few hard inquiries have little effect on your Credit Score. But if there are bunch of hard inquiries it will lower you score and any additional inquires will hit your score even harder. Many hard inquires in a limited time frame makes a person look desperate for a loan which is the reason it lowers your Credit Score.

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