Credit reports have a bad reputation – and it’s easy to see why. These few sheets of paper appear to have the power to make or break you. From renting a home, to accessing a loan, your credit report is sometimes the only thing left to hold you back. So it’s really important to know the truth about credit reports, and it’s not always as bad as you might think. Read on to discover the five most common myths surrounding credit reports.
It’s the Score that Counts
Unfortunately, the greatest myth of all surrounding credit reports is that you are given a numerical score which lenders depend upon make their decision. However, assessing the risk of them lending to you is far more complex than simply looking at a number. Each credit reference agency gives you a different score, so lenders will always delve deeper into the report to make their decision. Added to that, different lenders have different assessment criteria, so despite having the same report to assess, one lender can be far less likely to lend than another. Overall, they simply want to know you’ll repay the credit by reviewing all the information contained in your report.
Checking your Report Hurts your Credit
Again, this is a common myth. It’s important to regularly check your record, and in no way will this negatively impact your ability to borrow. The bigger danger is in making applications for credit, which will show up on your report. Too many of them will suggest to lenders that you’re in dire financial straits.
Credit Records are Always Accurate
Sadly, credit reference agencies do not always have the right information, so always check your report thoroughly, and make sure you’re clear about what it all means. Any errors on your report need to be rectified, and any legitimate reasons for defaults explained through a Notice of Correction. A credit report company such as Credit Cleaner can help you add a Notice of Correction to your report. The Notice of Correction should be no longer than 200 words and be factual and to the point.
You Cannot Remove Late Payments from a Credit File
This is a myth provided that the mistake was the lenders and not yours. If for example, you made a credit card payment on time, but it was not recorded on the system or came in late due to a banking error, you can write the lender and ask for them to remove the late payment mark on your file. They are not obliged to remove it, but will often do so to maintain good customer relations.
Paying off Credit Cards Harms your Credit Rating
The opposite is true – managing your credit well is the key to a good credit record. Remember another common myth is that cancelling cards will raise your score. In fact, if you are not utilising any credit this can work against you. So keep using a credit card, but be sure to pay in full each and every month, and on time.
Wendy Lin is a freelance writer who specialises in guest blogging. She enjoys travelling with her family and escaping to tropical countries whenever possible.