I caution you before we get started In this article, you are going to hear some things that will contradict what you have been told in the past. This is because credit is one of the most misunderstood topics, and most people, even many of those in the financial field, do not really understand credit.



Myth 1: Paying off collection accounts, tax liens, judgments, or late payments will remove the negative item from my credit reports.

This is false. By paying off these types of accounts, in most cases, you will actually see your credit scores drop significantly. The reason for this is because what you have effectively done is bring an old negative trade line to current status. A more recent negative item will cost your more points on your credit than an old negative item.

Myth 2: Paying my full credit card balance every month will improve my credit scores.

If the credit system were designed by your financial advisor, this would be a great plan, however, since the system was designed by your creditors, in order to maximize your credit scores, you need to give them what they want to see. What the credit card companies like is for a client to pay only a little more than the minimum payment, on time, every month. Occasionally paying down your balances slightly is ok. This behavior will maximize your credit scores.

Myth 3: Credit repair is not legal.

Very false! Credit repair is not only perfectly legal; it is actually protected by federal law. For more information on the law, you can refer to the Fair Credit Reporting Act (FCRA). It is legal for you to repair your own credit, as well as hire anyone you choose to do it on your behalf.

Myth 4: Consumer Credit Counseling will improve my credit.

Credit counseling programs will only harm your credit. The first thing that will happen as a result of enrolling in a CCCS or credit counseling program, is that your creditors will add the line "Account in CCCS" or "Account paid through credit counseling" to each of their trade lines. This will not affect your score, but does look very negative to lenders. The next thing that seems to always happen is that the credit counseling program will make the payments to your creditors late. Sometimes this is not their fault since they just setup the payment to be on your original due date. However, the credit card companies often adjust your due date, and since nobody, like yourself, is monitoring this, they began making your payments late. This will result in late pays on your credit, in addition to late fees.

Myth 5: Negative items have to stay on my credit for 7 years because that is the law.

This is also false. There is no law that dictates the duration that an item must remain on your credit reports. The only thing that dictates that an item must remain on your credit report is that it can be proven to be 100% true and accurate.

Myth 6: Making a lot of money will give you good credit.

Making a lot of money really has very little to do with your credit directly. What determines your credit is your payment history, account balances, your open accounts, the type of accounts, etc.

Myth 7: I have never been late on my payments, I must have great credit.

It is important to your credit scores that you have never been late on your payments; however, this is only one piece of the credit score pie. It is possible to have never been late on a payment and have sub prime credit, or no credit at all. Your history of payments only makes up 35% of your credit scores.

Myth 8: Your credit reports will be identical from each of the 3 major credit bureaus.

Wrong again! Most, if not all the time, your credit report from each credit bureau, Equifax, Experian, and Transunion, will be different. Not all creditors report to all 3 credit bureaus, so it is perfectly normal to have different items on each report. Also, your scores will not be the same since each credit bureau uses their own scoring model.

Myth 9: Once you are married, you and your spouse share the same credit.

False! This is something that many believe, but it is absolutely not true. Every individual has their own unique credit reports. You may share some credit items with your spouse if you have joint accounts.

Myth 10: Closing credit card accounts will increase your credit scores.

This is one of the biggest surprises that I see happen to people all the time. You go to your mortgage lender and they instruct you to close some accounts in order to qualify for a loan. You do as you are told, but only to see your scores plummet almost immediately; sometimes by more than 100 points. What happened? The reason for the drop was because you just closed some of your oldest and most valuable accounts as far as your credit scores were concerned. Remember, the longer you have had an account in good standing, the more positive points it will provide. It is not advised to close a long-standing account unless you have good reason.

You are now armed with some very powerful information that will surely be able to use to your advantage.