In the first editorial in this series, we defined a myth as:  something you believe because you heard it from someone else or saw it on a website like "credit repair is a scam".  This is soooooo not true.

Today's "myth" talks about:

PAYING OFF YOUR OLD DEBTS WILL REMOVE NEGATIVE INFORMATION ON YOUR CREDIT REPORT.

This myth is one of the most prevalent, and most damaging.  Paying off your debt helps you have no debt, but it does not necessarily help your credit score.  It can take two years for a paid off account to register as an improved score. 

Remember, your score is made up of five different categories:

1)   35% of your score is made up of your payment history.  The fewer late pays and partial pays that you have, the higher this percentage will count.

2)   30% of your score is made up of the amounts you owe, versus the overall credit limit you have.  For instance, if you have 3 credit cards, each one with a $5,000 limit, your available credit is $15,000.  If you have charged $3,000 on a combination of those cards, then your debt to credit ratio is 20%.  If you have charged up $12,000, then your debt to credit ratio is 80%.  The bureaus count 30% or below as good; the higher amount you owe, the lower your score.

3)   15% of your score is based upon how many years you have had credit.  Your parents may have had credit for 30 years, but you may only have had credit 2 years.  The bureaus take this into account, and favor the consumers who have a longer history.

4)   10% of your score is based upon how long it has been since you received new credit.

5)   10% of the score is weighed based on the types of credit you are using:  mortgage, installment payments like a car or furniture, vs. unsecured credit card debt.  The more diverse, the better your score.

Having explained that, one can see that paying off your debt completely, and closing an account could actually be harmful.  Lets use that same $15,000 total available credit scenario.  You decide to pay off one of your credit cards and close it.  Now you only have $10,000 in available credit.  If you owed the same $3,000, your debt to credit ratio is now at 33.3% instead of 20%.

Donna Perkins

Credit bureaus will most often remove negative credit information that is not verifiable. This is why we work so hard on your behalf.  If you wish it, and select this path of credit restoration, we will challenge the creditors for you.  They must be able to provide the paperwork that proves you owe the debt.  If they cannot do so, we can most likely get the debt voided and removed.

However, let us be clear.  We cannot claim to remove “accurate” reporting.  So if you have a negative item that can be verified, it may need to be paid off to take the next steps to a better report.  Ask your Credit Concierge™ for more information.  Click here.

In the last editorial, we defined a myth as:  something you believe because you heard it from someone else or saw it on a website like "credit repair is a scam".  This is soooooo not true.

Today's "myth" talks about:

CREDIT BUREAUS ARE REQUIRED BY LAW TO KEEP DEROGATORY OR NEGATIVE ITEMS ON YOUR CREDIT REPORT FOR 7 TO 10 YEARS.

This statement is untroe.  There is absolutely no requirement of law that credit bureaus report ANYTHING ON YOU AT ALL! 

Credit bureaus, commonly known as Experian, TransUnion, and CSC/Equifax, are private companies.  They make their income by collecting and selling your personal information.  WHAT! you say?  That's right.  Let's delve deeper into this multi-billion dollar business.

First, you purchase something from a creditor (Sears, Arco, Home Depot and more), and you put it on a credit card.  It could be the credit card offered by the creditor, or it could be a general credit card you got from Visa or Mastercard through a lender like CitiBank, Chase, etc.  The company is saying that they will trust you to take the item you are purchasing home with you without paying for it today.  You have just applied for and received "credit".  The credit card comes with a set of rules that must be adhered to:  for instance, if you pay off the balance in full before the next billing cycle date, there will be no interest charged.  If you do not pay the balance in full, whatever balance exists at the time of the billing cycle change, an interest rate will be applied to that balance.  And so it goes, month after month until paid off. 

In addition, if you miss a payment, or go over the credit limit they have granted you, there will be additional charges.

The creditor (Sears, Arco, Home Depot) may choose to report your credit activity and history to one or more bureaus.  That's right…not every creditor reports to all three bureaus.  Wonder why?  It costs them money to do so.  Each bureau charges the creditor to receive your information on a monthly, quarterly, or annual basis.  And you usually do not know what the creditor's standard practice for reporting is until it bites you.

Whether or not the information they convey to the bureaus is accurate, it is all done electronically.  So a typographical error can occur in the transmission of data, or at the receiving end of the transmission.  This makes the number of mistakes grow.  Add to that the fact that in some cases, the data they are conveying to the bureau is inaccurate (as in the example of a debt that has been paid off, but not yet shown in the data), and you can easily see why so many mistakes occur.

Donna Perkins

The bureaus do have rules they have to follow.  But at present, there is no "effective" body that has oversight over their methods.  Enforcement is a problem.  But one thing is clear.  If you have had a bankruptcy, the bureaus are required to report that data for 7-10 years:  7 years in the case of a Chapter 13 bankruptcy, and 10 years in the case of a Chapter 7 bankruptcy.  They are required to report liens for up to 15 years.  Usually, when you have a derogatory item on your report, such as a late payment or other less serious infringement, it can stay on your report for up to 7 years…however, creditors who are reviewing the report usually do not look beyond the last two years on your history.  So the timing is critical to you applying for new credit or for a credit increase.

Myth #2 is debunked.  Stay tuned for Myth #3.  If there is something we can do to help you clean up your credit history, click here.

(Note to consumers:  This is the first in a series regarding common misconceptions about credit repair or credit restoration.  The information contained is deemed to be accurate, but not guaranteed.)

What is a myth?  Merriam Webster's Dictionary defines a myth as "a usually traditional story of ostensibly historical events that serves to unfold part of the world view of a people or explain a practice, belief, or natural phenomenon – parable, allegory".  Well I don't know about you, but you might as well have spoken Greek to me!  I didn't get that.  So let's look at a simpler definition:  Parable-a usually short fictitious story that illustrates a moral attitude or a religious principle.  OK, we're getting closer.  Let's look at allegory:  the expression by means of symbolic fictional figures and actions of truths or generalizations abut human existence.  Now I'm confused again.

Can we suffice it to say "a myth is something you believe based on someone telling you something that may or may not be true?"

In the case of credit repair, myths are things that you believe because you have heard it from someone or on a website, like "credit repair is a scam".  That is soooooo untrue.  So, let's explore one myth that you might believe about credit repair: 

Myth #1:  INFORMATION ON YOUR CREDIT REPORT CANNOT BE CHANGED!

Exactly the opposite is true!  In fact, the Fair Credit Reporting Act which was enacted in the 1970's was put into place by Congress to make sure that consumers have a way to correct things on their reports that are misleading, outdated, inaccurate or unverifiable.  There have been many changes to this act to further strengthen it's enforcement abilities. 

However, the general public does not have a clue how to go about getting something changed.  The typical consumer who does his own credit repair goes about it this way:  he types out a letter, or handwrites it, stating why he thinks an item on his credit report is inaccurate.  He mails it to one of the bureaus, or perhaps all three bureaus:  Experian, TransUnion, or CSC/Equifax.  They all provide PO Boxes for this type of dispute. 

He mails it in.  When the bureau(s) receives it, their system tries to scan it and upload it into their computer program called E-Oscar.  The computer attempts, by the use of word recognition, to determine which category the complaint should be referred to.  The Bureau has 30 days with which to reply.  Often times, the Bureau simply sends out a form letter stating that there is not enough information provided to verify the complaint.  This is a delay tactic that gets most people to give up at that point.

It takes an experienced company who has done this tens of thousands of times to know the exact wording to use to get the result desired.  The manner in which the letter is prepared can also make the difference between the complaint getting handled or not.

Remember, while FCRA gives you the RIGHT to dispute, it does not guarantee that disputes will be handled at all, nor does it discuss what happens when you get one of the dismissal letters discussed above. 

At KC Credit Services, when you enroll with us, we perform a forensic audit of all three bureau reports, and work with you to determine what is misleading, outdated, inaccurate or unverifiable.  We then get to work to resolve all inequities.  While we do warrant that we will obtain improvement to your reports, we do not guarantee results, as we hve no control over the bureaus.  We rely on the experience we have gained since 1999 with more than 110,000 customers.

Donna Perkins

The process of improvement can take 7-12 months, depending upon the types of complaints and the number of inaccuracies.  You did not get into this position overnight, and there is no reputable credit restoration company who can legitimately tell you that they can do this any quicker. 

Myth #1 is debunked.  Stay tuned for Myth #2!  Meanwhile, if we can help you in any way, click here.