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Seven Credit Score Myths
7 myhts about your credit score
By Kevin T. Cloves
While counseling credit repair clients, the credit repair attorneys at Smith & Garg have heard many seemingly reasonable statements about what can affect one’s credit score. We have compiled a few of the most common credit score myths in this article and offer the following interpretations and responses:
- If I make my credit card payments on time, every time, my credit score will certainly rise.
Misleading. Making your payments on time is crucial to maintaining a good credit score. In fact, your payment history can count for up to 35% of your credit score. It is important that you make your payments on time and for the correct amount. More about timely payments later. However, simply making timely payments will not in and of itself raise your credit score. Other factors can erase the benefit of timely payments like having a high credit to income ratio or having high balances on your cards that are close to your credit limit. If you can, continue making timely payments and add a little extra in from time to time to chisel away that high balance. The quicker you can lower your balance and maintain a low used credit to available credit ratio, the quicker your credit score will improve.
- If I check my credit score, my score will lower.
Wrong. Inquiring about your credit score yourself will not lower your score. When a person inquires about his own credit score, that is called a “soft inquiry.” Another type of soft inquiry occurs when one of your existing creditors checks your credit as a regular course of business to assess your current credit worthiness. A soft inquiry will not lower your credit score like a “hard inquiry” will. A hard inquiry occurs when you apply for credit and a potential creditor then runs your credit score, or makes an inquiry. Your credit score will lower each time there is a hard inquiry on your report. Oftentimes, creditors will run hard inquiries without your knowledge or authorization. If you did not give written permission for the hard inquiries, then upon dispute, the reporting agencies must remove them from your report. This will cause your credit score to improve. The credit repair attorneys at Smith & Garg are able to remove unauthorized inquiries, which will raise your credit score.
- After 7 years, all negative entries on my credit report will automatically fall off.
Wrong. By law, an entry that is seven years can be removed. However, it is very common to find that entries over seven years of age will remain on one’s report. This is not necessarily a bad thing. If the entry is positive, then it will likely not affect your score negatively. However, if the entry is damaging, you must get it removed. Often, third-party debt buyers will purchase seriously delinquent accounts and attempt to collect. These third-party buyers will report the account to the credit reporting agencies even after the 7-year time period has lapsed. This is a common, yet illegal practice. Consult a Smith & Garg credit repair attorney for the best and quickest way to get the stale negative entries removed from your credit report. Once removed, your credit score will improve.
- If I am one day late on a payment, my creditor will report it to the credit reporting agencies.
Wrong. Most creditors do not report late pays until they are 30 days or more late. However, your creditor can treat your late payment as a triggering event to charge you a higher interest rate – a default rate. The default rate is listed in your credit card agreement that, from time to time is included in your monthly statements. Oftentimes, depending on the creditor, that default rate can be as much as 30% or more, effectively doubling your monthly payment in some instances. While a higher monthly payment will not affect your credit score, it may affect your cash flow and push you toward a blown budget. Other disastrous effects of triggering a default interest rate are discussed later in this article.
- The credit repair process does not take very long to complete.
Wrong. Credit repair, while admittedly not rocket science, takes time. Once a dispute is lodged with a credit reporting agency (“CRA”), the CRA has from 30 to 45 days to respond. During this period, the CRA will ask the creditor in dispute to verify the disputed information. Upon completion of the 30 to 45 day period, the CRA will report back to the consumer the results of the “re-investigation.” If the disputed item is verified, then further dispute is necessary. It could take several months to complete repairing your credit. Depending on the characteristics of the disputed material, direct negotiation with the creditor may be needed. For that, it will be most helpful to have a credit repair attorney to assist you.
- Repairing my credit will be expensive.
Wrong. Not repairing your credit is even more expensive! Repairing credit takes time and work, which costs money if you hire someone to do it. However, not addressing erroneous negative entries will cost you many times the amount spent to repair those entries in the form of higher interest rates and denied credit. To get the most from your investment in credit repair, it is imperative that you hire a credit repair expert. A credit repair attorney will be able to advise you on the most effective ways to repair your credit as well as deal with the CRAs and creditors directly if such is needed. Remember, credit repair is an investment and not merely an expense. Only you can decide if the investment is worth its return.
- Once my credit has been repaired, it is not necessary to monitor my credit reports.
Absolutely wrong. You or your credit repair attorney should always monitor your credit reports every few months and address any wrong information contain in them. Daily, creditors report to the CRAs. If the information reported to the CRA is wrong and negative, your score will be negatively affected. Remember, your creditors monitor your credit reports as a regular course of business to assess your current credit worthiness. If an erroneous negative entry is placed on your report, your creditors could likely use that negative information regarding another credit card account as a triggering event to raise your interest rate. This practice in called “universal default.” Universal default can cause your interest rate to rise to the default rate allowed for in your credit card agreement and can be over 30% in some cases, but always higher than your current rate.
Monitoring your credit reports is simply a good practice to ensure financial health. The credit repair attorneys at Smith & Garg can assist you with monitoring your credit reports and counseling you regarding any action needed to keep your credit score high.
The myths addressed in this article are but a few we at Smith & Garg encounter daily. If you have a question about credit repair, the credit repair process or whether the services at Smith & Garg are right for you, click the “Contact” button and a credit repair attorney will contact you to discuss your concerns.
Remember, repairing and monitoring your credit report is not merely an expense, it is an investment!
Contact the Credit Repair Attorneys at Smith & Garg today to get started!
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