Credit Facts & Fiction
The Credit Bureaus all share the same information
You can't really get negative accounts off your credit report
It's legal for credit repair companies to charge you up front for their services
A detailed written contract for you to sign/agree to
Give you three days to cancel your agreement/contract - NOTE: This particular mandate only applies to for-profit credit repair companies. This excludes: nonprofit organizations, banks/lenders and credit unions.
Also note: Be leery or skeptical of most “credit repair” companies. Far to many of them is scam or scheme one way or the other. However, not all are, so be careful in choosing one if that's the route you decide to take.
Create a second credit file in order to start with a clean slate
There is no benefit in adding a statement in your credit file
Credit reports and/or scores are biased in some aspects
This includes: your name (possibly even nick-names), address (current and old addresses), date of birth, social security number, and employment information (current and past employers). This type of information comes from information you provide on applications when you apply for credit. The lender or creditor then posts that information into your credit file. In any case, personal identifiable info does not factor in anyway on your score.
Trade Lines (credit accounts – usually positive accounts) - Does factor in your score
Creditors/lenders can report each account you have, as well as post your payments (paid on time, late, missed payments, etc...). This includes all accounts (credit card(s), auto loan, personal loans, mortgage, etc). Creditors may also report the date your account was opened or the date it was closed; they may report the loan amount, balance or credit limits. It's important to note, creditors/lenders have the right to report this information or not report it at all, they may report this info to some reporting agencies but not all of them. The only thing they have to do (if they report), is report the information accurately, but they do not have to report anything at all.
Credit Inquiries (hard & soft pulls on your credit file) - Can factor in your score
Every time you apply for a loan, you give your consent to the lender to pull your credit report, when they do this, it's an inquiry. All credit inquiries remain in your credit file for 2 years from the date the lender did the inquiry. There are different types of inquiries; one type is “voluntary” also known as “hard pulls” - this is when you voluntarily give your consent to a creditor to pull your credit report for the purpose of obtaining credit. The other type is “involuntary” or "promotional" inquiries - this is when you did not give consent to a full review of your credit report. Instead, a lender will do a “soft pull” on your credit report for the purpose of sending you “pre-approvals” in the mail. Lastly, "consumer initiated inquiries" - this is when you pull your own credit report soley to review the content within it. When you pull your own credit report, you will see a list of both the “hard pulls” and “soft pulls.” Only hard pulls have an affect on your score and having multiple “hard pulls” can have a large negative impact on your score. Hard pulls will generally have a small negative impact but only affects your score for 1 year. Soft pulls (no matter how many) will not have a negative impact on your score. In some circumstance, having multiple hard pulls in a relatively short period of time will have the same affect as having only 1 hard pull (small negative impact). This is usually the case when someone rate shops for a large purchase, for example, a mortgage.
Public Records and Collection Accounts (negative accounts) - Does factor in your score
Negative information or negative accounts includes: collection accounts, law suits, wage garnishments/attachments, liens against property, bankruptcies, judgments, and foreclosures. Some of this information is given to the credit reporting agencies by the negative account holder (collection agencies) and some of it is obtained by the credit reporting agencies collecting these public records through state, county and federal courts. Negative accounts usually remain in your credit file for 7 years, but depending on the type of account, it could remain in your credit file beyond 7 years, for example, a bankruptcy could remain in your file for up to 10 years.
Both your score and credit report do not use or hold certain information. This includes things like your race/color, religion, or sexual orientation. Federal law(s) prohibits this, plus, public assistance information, or if you exercised any consumer rights under the Consumer Credit Protection Act. Any information that could be considered as something that a lender could be biased on (one way or the other) is not listed. This insures when a lender reviews your credit file and checks your score, only your credit performance is taken into consideration and nothing further (although things like employment history and salary may be used in determining approvals and/or terms). Your score is unbiased on all social issues and only considers your past credit performances to predict a likely future performance. That determination is based on information regarding your credit accounts (both positive and negative accounts) as well as hard pull inquiries. There are multiple things taken into account for each account, (age of account, utilization, payment history, balance and much more), when factoring your score. Below are the factors given by Fair Isaac Corporation (FICO) in coming up with your score, although the exact formula used is a well kept trade secret:
- 1. Payment history = 35% of your score
- 2. Amounts owed = 30% of your score
- 3. Length of credit history = 15% of your score
- 4. New credit = 10% of your score
- 5. Types of credit = 10% of your score