The choice to start the credit repair process can be one that is empowering to yourself but, for as empowering as it may be or may seem further empowering yourself with the truth, tools, and resources in credit education that you need to make informed decisions about which company to go with is crucial to the success that you are aiming to achieve based around whatever your personal goals are when starting the process of repairing your credit.
Credit Repair Myth 1: Paying Off Collection or Delinquent Accounts Removes Them From Your Credit Report.
Many consumers seem to believe that paying off their delinquent accounts or collection accounts completely removes not just the delinquency period but the account in question as a whole. This is absolutely not true. Instead what happens, when you pay off a delinquent debt the time period in which the account showed as delinquent will still show as delinquent on your credit report (with a 30, 60, 90+ day time frame) reflecting how long the account went unpaid, and even if you make those delinquent or late payments up they can continue to show for 7 years from the original delinquency date.
Credit Repair Myth 2: Credit Repair Companies Are Illegal
While it is illegal for credit repair companies to charge up front for credit repair under the credit repair organizations act, many companies will charge an initial strategy (written and provided to you) or account set up fee that is fully legal to charge while offering a per item removal charge where no further work is done on the file until a client has paid for what has already been removed by the company. Paying or even offering “Full price, upfront” options however, is illegal under the Credit Repair Organization Act (CROA) and further highlights the fact that it is illegal to lie about what they can do for you as a credit repair company. The only applicable option that may be allowed is to charge up front, place money in escrow and then take the administrative or strategy fee and the per item removed price out as items fall off, complete with a money back guarantee on moneys paid up front but where services were not rendered.
Credit Repair Myth 3: Filing Bankruptcy Offers An Immediate Fresh Start With No Recourse Or Consequences:
As millions of consumers learned during the crisis of 2008 and beyond, filing bankruptcy does not provide an immediate fresh start from previous financial problems. While bankruptcy does offer a fresh start, for those that are in process of potentially losing their homes, what they will find if they begin the apartment or rental home search is that in most areas of the country there is a strict ban on renting an apartment for as long as a bankruptcy (or eviction) is appearing on your credit report.
It’s as a result of this that we cautiously advise our clients considering bankruptcy to learn the facts, learn the consequences, and ask questions of their bankruptcy attorneys and or consultants. One size does not fit all in this aspect, and while it may be the best possible choice for you at some point (perhaps even right now as you read this) there may be better solutions out there, and it’s best to speak with a certified credit counselor in addition to a bankruptcy attorney to learn more about what options may be available to you.
Credit Repair Myth 4: Inaccurate Information On Your Credit Report Has To Stay There:
Contrary to popular belief, inaccurate information under the FCRA HAS TO be removed by the credit bureaus and your creditors within 30 days via either a validation or dispute claim made to your creditors and to the credit bureaus.
In some cases, the law also states the in cases of proven fraud this time period also significantly decreases however, it’s best to consult the FCRA to determine which time period is applicable to the inaccurate information appearing on your credit report(s).
Credit Repair Myth 5: Your Credit Score Will Immediately Increase If You Remove Delinquencies & Other Negative Information.
While many consumers believe that removing collection or delinquent accounts from their credit reports will lead to an immediate increase in their credit score, they are more often than not incorrect about this.
The truth is that your credit scores are made up of several factors including but not limited to, credit utilization, payment history, credit account ages, and more… it’s because of this that we can confidently say that when full accounts are removed from your credit reports that had a long term standing of years in age, it will actually result in a credit score decrease in most if not all cases. The reason why is because while payment history makes up 35% of your credit score the overall length of your credit history makes up 15% of your credit score so when you remove an account from your credit report that has years of history behind it, you’re removing the history right along with the account that further assists you in maintaining a good credit score.
Credit Repair Myth 6: You Only Need Credit Repair To Fix Your Credit.
If we told you that you only need credit repair to fix your credit, and obtain good credit to obtain new credit cards, a new loan, a new home loan, a new car or even to refinance your existing mortgage or to get funding for a new business venture, we’d be lying to you.
What is missing in this industry that’s full of false promises, and lies is truth, and we’re committed to bringing truth to you.
When you commit to repairing your credit as outlined above, there may be aged accounts, and accounts that have a very long history attached to your credit reports that are actually keeping your scores higher than they would be if you deleted them.
If deleting entire aged accounts becomes a possibility, considering the possibility of investing in a new secured credit card, or a line of authorized user tradelines may be your best option in order to raise your scores while piggybacking off of a family member, friend or another’s credit. In considering this option however, make sure that only up to 10% of that account is being used, it’s got a good credit standing with no late payments or delinquencies on it and that, the account has got several years of history behind it in the positive form this should help you meet lender qualifications in order to secure new accounts of your own, that you can maintain and use responsibility in order to start rebuilding your credit, and continuing to secure more funding and forms of credit as it’s needed into the future.
Credit Repair Myth 7: My Credit Report Can’t Contain Mistakes.
While it’s true that legally, your credit report is not suppose to contain mistakes, studies by the FTC and CFPB report and show that 1 in every 5 consumer credit reports has at least some type of error on it.
Diligence in working to correct these mistakes will be key, and sometimes, removing and or correcting errors while it’s suppose to happen within 30 days can take months even though it shouldn’t therefore, many consumers become so frustrated with the process and the lack of results that they begin searching for help in removing these incorrect items, and that’s when all of the incorrect information that seems to dominate the internet starts to present itself.
If you find yourself in a situation where you’ve discovered an error on your credit report, don’t wait to remove it or hope that it will remove itself. Again, diligence in correcting this information will be key to the successful removal and correction of inaccurate information.
Credit Repair Myth 8: If One Credit Bureau Removes Something Inaccurate, The Others Will Too.
Many consumers believe that they only have to dispute an error on one of their credit reports in order to have the item changed on all 3 credit report files. Others simply believe they only have one credit report, and because they believe this they focus on the credit report that they know has an error, mistake, or where there’s general negative information. This isn’t the case, and if an account or negative item is shown on more than one of your 3 bureau credit reports, it needs to be disputed every where that it appears so that the item can be corrected as it should be.
Credit Repair Myth 9: Credit Repair Companies Can’t Charge You.
Under the Credit Repair Organizations Act and as outlined above, credit repair companies absolutely can charge you but, they can not charge you up front fees for services that they have not yet rendered.
Under the Credit Repair Organization Act, what is okay then?
Well, that’s a little complex, and a lot is left up to interpretation but here’s what our as well as the general consensus in the industry says:
Strategy takes time, an audit and review of your credit reports takes time, coming up with the right solutions to lead you to your goals (legally) takes time, right? This is where an account set up and or strategy fee would LEGALLY come in to play if there is a document with work (even a strategy outline) sent to you telling you what the plan is.
But What If I Would Rather Pay Up Front For Credit Repair Because I KNOW I Have The Money Now.
We get it. You’ve got the money, you just got your tax return in, you’ve saved up some of that stimulus money or whatever the case may be and you want to make sure that you are investing it in something that is actually important to you and not more unnecessary stuff.
A-lot of people want to do it this way, and we get it because it is more convenient but if that option is offered to you, make sure that money is put and kept in escrow and only the setup or strategy fee and then whatever is removed is taken out based on what a contract says and tells you. Read the fine print, and do not enter into an agreement that just sells you a one time $1500 package unless that money is going to go into escrow and be pulled from one account to the other with tracking, and or proof. We’ve seen a lot, we’ve seen a lot of the false promises out there, and while we also believe that there’s room for everyone in this industry as long as there process works, our goals remain the same – to get you to the finish line, and get you to a place where you’re achieving your goals, with or without our help, and part of that is making sure that you aren’t investing your hard earned money with a company that is lying to you.
Credit Repair Myth 10: Hard Inquiries Don’t Affect My Credit Scores Or Affect My Ability To Obtain New Credit.
Unfortunately hard inquiries are the subject of confusion for many consumers. Many consumers seem to believe that hitting that apply now button with less than good credit is going to get them approved for new funding, others don’t realize that every apply now button or every application submitted over the course of a 30 day period of time as long as it’s only for the same type of loan only counts as 1 inquiry made over the course of that 30 day period. The problem is, is over the course of 63 days just as an example, you may apply for a car loan, a group of credit cards, new health, home, life or auto insurance, a personal loan with your local bank or credit union, plus a new mortgage, and that could easily add up to 5 or 6 inquiries at minimum all because of the timelines that you applied within.
After speaking with countless lenders on this subject, they’ve explained to us that 7 inquiries over the course of about 2 years is the max that they allow borrowers to have applied for new credit. Any more, and it appears as though they have been splurging, and may have even had a need for new credit that may reduce their chance of obtaining a new home loan. Auto dealers and finance companies have similar policies, and while they understand the need to finance shop when it comes to both of the above examples, repeatedly running applications to only result in denials means that they did not appear favorable to the lenders when the application was made for whatever reason may or may not have been given.
It’s with all of this taken into consideration that we recommend hitting that apply now button with caution, and obtaining a pre-qualification letter without any hard inquiry pulls prior to applying for any type of funding that may be available to you if and when you know you will be applying for funding at any point and time in the future.
Conclusion To Our Top 10 Credit Repair Myths:
In conclusion to our top 10 credit repair myths we want to remind you that not all credit repair companies are the same. Some have your back, and work with you to help you reach your goals but others are most definitely out there to just take your money, and we want to provide you with a resource to help you learn how to tell the difference between the two types.
To book a limited one time, free consultation with us, click on the link below, and a member of our team will be in touch with you to review your credit reports with you, and provide you with custom recommendations that are unique to your goals, and current questions about the credit repair process.