5 Untruths About Your Credit Report

July 21, 2008 By Tisha Kulak

Like with many facets of life, there are myths aplenty when it comes to personal finances, in particular one’s credit report credit score and credit history report. Myths can be really harmful when it comes to your personal finances so it is best to have the correct knowledge before making important financial decisions.

Here are 5 things you might not know about your credit report.

1. Closing Accounts Help Credit - The basic rule of thumb for open accounts is to not have too many open and to not have too few open. Extremes with credit are never a good idea. While creditors want to see that you can be responsible with two or three lines of credit, they do not want to see a ton of accounts on your report either. The most important criteria is that you make your payments on time, every time.

2. Paying Everything Off Perfects your History - While it is of course great to pay off your debts, take note that even when you do, your credit score will not be shiny new. It is not called a credit history report for nothing. Your report will show creditors your past as well as your present credit situations.

3. It’s All Good After 7 Years - While some of the bad stuff on your report will disappear after the seven year mark, however filing Chapter 7 bankruptcy in which you are forgiven of all debt, will remain for ten years. As for a positive, the good stuff, such as not missing a payment or having any other account problems will stick around on your report for up to 10 years as well.

4. Credit Report Agencies are All the Same - All three of the credit reporting agencies, Experian, TransUnion, and Equifax, do track your credit information and provide you with a credit score. However, all three are separate companies with different rules for processing information. When a creditor requests a copy of your credit report they typically only request information from one company, who may or may not be as up to speed as the others with your information. Periodically requesting a report from each will help you understand how each processes your credit information and you should check all reports at least once a year.

5. Debt Management Programs Destroy Credit - Your credit score is not affected by your association with a debt counseling program unless there is a negotiation to pay back less than you own. It is then up to the creditor to decide how to report the action to the credit bureaus, especially if you remain delinquent in your payments. Your association with a debt counseling program will be evident in your credit file but will not adversely affect your score.