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The Truth About What Impacts Credit

5 credit report myths you need to know

March 3, 2016

By STACEY BUMPUS - Tribune News Service

If you think the credit reporting process is complicated and too hard to understand, you're absolutely right.

With several different credit bureaus, countless credit reporting laws and rules, and more than a handful of websites advertising "free" credit reports and scores -- it can be hard for the average consumer to fully comprehend what goes into a credit report, how the information is reported and how it can impact a credit score.

As a result, you might turn to your friends and family members or personal finance websites to get your questions about credit reports answered.

That's fine, but be careful: Some of things you'll hear will be credit report myths that need to be debunked.

In fact, here are five of the most common myths you should be aware of:

Checking My Credit is Unnecessary if I Pay My Bills On Time
Many people think that just because they pay their bills on time, they don't need to check their credit reports.

However, your credit information can become compromised due to an error or even fraud, and the fastest way to catch these credit issues is by regularly checking your reports.

I'll Hurt My Credit Score if I Check My Own Reports
The difference between a hard check and soft check is the reason why checking your own credit reports will not impact your score.

A hard credit check -- also called a "hard inquiry"-- is used by lenders and creditors to review all of your credit information.

Several hard pulls within a short period of time generally impacts your credit negatively.

However, a soft pull -- also called a "soft inquiry" -- does not.

Soft checks allow individuals to review their own reports, as well as allow lenders, employers, landlords and others to review limited data.

Paying Off a Debt Will Remove It From My Credit Reports
Borrowers are often frustrated to learn that after they've paid off a debt, it isn't automatically removed from their credit reports.

Negative entries generally aren't removed for seven years and as many as 10 years for serious delinquencies, foreclosure or bankruptcy.

However, this applies to negative items that are correct.

If you believe there are inaccurate negative items on your credit report, notify the credit reporting agency immediately. Once the errors have been identified, they should be taken off your credit report.

Only One Entry Per Debt Will Display on My Reports
If you owe money to a company that has sold the debt to a collection agency, both accounts might show on your credit report.

This means you could have two negative entries on a credit report for a single debt.

If you have questions about this, contact the credit bureau or speak to a credit repair professional.

Canceling an Old Credit Card Will Hurt My Credit History
This is one of the most prevalent credit myths out there.

Canceling your oldest credit card will not reduce your credit history or negatively impact your credit.

Closed accounts will remain on your reports, often longer than negative entries.

However, closing a card with a big credit limit when you have outstanding debt could affect your credit utilization ratio.

So, be sure to close credit card accounts only when you have a small line of credit or zero balance among all your cards.

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Distributed by Tribune News Service.

This story was distributed by TNS - Tribune News Service
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