5 Myths About Credit Reporting

In our practice of assisting consumers with credit report
errors, Justice _scalewe come across many misconceptions that
consumers have about
their credit reports
, and the rights they have.  
Here are 5 commons ones, and the truths behind them:

1.  When I pay my bill off entirely, it will come
off my credit report:

This is entirely untrue.  If the item being paid off was
never in a negative status, then the reporting of the account can
stay on indefinitely, though typically the credit bureaus remove
after ten (10) years.  Negative information such as missed
payments, late payments, or charge offs, can remain on a credit
report for up to seven years from the date of that negative event –
regardless of if or when the debt is paid off entirely.  The
creditor does have to continue to report the account
accurately.  That is, they cannot leave the account reported
as charged off and unpaid with a balance remaining.  The
creditor can report that it was paid after the charge-off or paid
in full, but does not have to delete the previous negative history
until that history is seven (7) years in the past. 

2.  If I did not sign any contract with a company,
such as a debt buyer or collector, then they cannot report on my
credit: 

Creditors sell or assign debts for collection all the time. 
When they do, that collector steps into the shoes of the company
from whom they got the debt.  They do have the right to
collect the debt, and they do have the right to report that the
debt is unpaid and/or in collections.  Just because a creditor
washes their hands of a debt, it does not mean the debt
disappears.  
 
3.  I can sue a creditor for reporting false
information on my credit report:

This is kind of true.  Yes, you may pursue a creditor in
court for reporting inaccurate and/or misleading information about
you, however, it is not so straight forward.  The right to
have a credit report free of errors comes from the Fair Credit
Reporting Act (FCRA)
.  The FCRA mandates that a
credit report contain “maximum possible accuracy.”  If it does
not, a consumer does not have an immediate right to address this in
court.  Under the FCRA a consumer does not have the right to
sue a creditor unless and until that consumer has first disputed
the debt
directly to the credit reporting agencies
themselves.  The credit reporting agencies must then
communicate the dispute directly to the creditor (within 5 days of
receiving the dispute) and then report back the results to the
consumer with thirty (30) days of receiving the dispute. 
Then, if the information is not accurate, there may be a right to
pursue the creditor.  However, this requires two things still
(1) that the creditor is in fact guilty of failing to reasonably
investigate the account pursuant to the dispute, and (2) that the
consumer is damaged by the continued reporting of the
account.  For information on how to properly dispute a credit
report, see our page on disputing
your credit report
.  
 
4. If I make all of my payments on time, I will have a
high credit score:

While making all payments on time is the most significant scoring
factor, it does not outweigh other important factors that can keep
your score down.  Payment history makes up for about 35% of
your score.  However, the amounts of money owed overall is a
close second at 30%.  This means factors such as how much of
your available credit is used and how many accounts that contain
balances have a large affect on your score.  As such, paying
everything on time is great, but your score will still be affected
if your credit cards are near their limits and/or there are a lot
of accounts open with balances.  Also affecting your score,
but not quite as much, are the history of credit – how long you
have maintained credit, and the types of accounts you have
open.  Even a high amount of inquiries into one’s credit can
affect the score.  
 
5. Disputing my credit report is a waste of
time:

Sa dly, many people feel that the credit bureaus are too big to
fight, and we just have to deal with whatever they report. 
It’s the wrong way to think.  The FCRA provides a
dispute mechanism that requires the credit bureaus and the
creditors to engage in a reasonable investigation into a
dispute.  The more information a consumer is willing to give
the bureaus about their dispute, the more chance they have at
success in their dispute process.  If the credit bureaus and
the creditors fail to remove information that is inaccurate, the
consumer is entitled to recover any damages they have suffered,
potentially $1,000 as a statutory damage for any willful or
reckless conduct and any attorneys fees and costs incurred in
having a lawyer represent the consumer in a case.  

If you need assistance making your credit report appear with
maximum possible accuracy, contact us
for a free case review.