Credit Repair Myths

Credit repair myths and misconceptions are widespread. Even with the importance of credit in our lives today, there are a lot of people that don't really know that much about credit and how it can be damaged or repaired.

Many different myths and misconceptions exist in regards to credit and credit-repair, and there are a lot of people who don't even bother looking into the facts concerning this topic until it is too late and their credit file has been severely damaged or compromised.

There are no real secrets to repairing credit. Many questionable credit repair agencies would prefer you to think otherwise.That is why so many credit repair myths and misconceptions exist. Negative items can be removed from your credit report and you can do it yourself.

One does not necessarily need a credit repair "expert" or "law firm" to do it either. The credit world can seem complex to the average individual--but the basics are really simple once you know them.

Here we'll discuss some of the more common credit repair myths and misconceptions, as well as the factual information that goes with those ideas. Of course, before we get to that it's important that you understand exactly what credit is and how it works.

What Credit Is

In order to understand why many credit myths and misconceptions aren't true, it's important to understand exactly what credit is in the first place. At its most basic, credit is a measure of how well you have paid your loans and bills in the past.

Positive experiences cause creditors to send positive reports to credit bureaus, who in turn add to your credit score ; negative experiences and late payments result in negative reports which subtract from your credit score. The higher your credit score is, the better your credit and the more likely lenders are to offer you good rates on loans and credit lines.
Myth #1 - Credit Can Be Repaired Instantly

There are a number of credit repair scams that all offer you instant credit repair... unfortunately, they can cause you a variety of problems and even get you into legal trouble. These scams operate by obtaining a new tax identification number for you, usually in a manner that is legally reserved for businesses. This new number is a blank slate credit-wise, but if you use it instead of your own identification number you can be charged with fraud. Worse yet, the scam artist might steal your information for identity theft.

Myth #2 - You Can't Check Your Own Credit

Many people believe that you aren't allowed to check your own credit, or if you are then it'll cost you. This is a credit repair myth and misconception. Many places actually allow individuals to check their credit once per year (or more) for free, so long as they do it through the appropriate government agency. Some credit monitoring services also offer free credit reports, though they require that you sign up for a trial of their service in order to do so. If not canceled within the trial period, you will then be billed for their credit monitoring service... which can cost more than the credit report would.

Myth #3 - You Can't Fix Bad Credit

With all of the advertisements and offers for credit repair services, there are still those who believe that truly bad credit can't be repaired. This is another credit repair myth and misconception. At times it may seem that way, but any credit can be repaired with time and careful repayment of your debts. As old debts are paid off and newer debts are paid on time, even the worst credit will slowly but surely begin to improve.

Myth #4 - Bankruptcy Is An Easy Way Out

Many people view bankruptcy as an easy way out of debt, which is why the penalties for filing bankruptcy are so severe. Bankruptcy should be used as a last resort only, because it can lead to years of not qualifying for prime credit cards and interest rates on mortgages, etc. Even after the bankruptcy has been discharged you might find it nearly impossible to establish new lines of credit with reasonable terms and fees until years later. It is possible, though, if you carefully rebuild your good credit file, to recover from bankruptcy and create a very sound financial record for yourself.

Myth #5 - You Should Cancel Credit Cards You Don't Use

One of the most widespread credit repair myths concerns how to handle credit cards you no longer want or use. When you close a credit account, that credit limit disappears from your credit report. The more "open credit" -- that is, available credit you have that you are not using -- the better your credit usage ratio appears. This improves your FICO or Vantagescore score. It is best to only use about 30% of the available credit limits you have. When your credit cards are charged up close to their limits, your FICO or VantageScore score tanks. Therefore, leave open any credit lines you can--even if it means putting a small purchase on it every six months or so and paying it right away. The more "empty credit lines" reporting for you, the better your credit rating appears.

As you can see, credit repair has a lot of misinformation surrounding it. Many different credit repair myths and misconceptions lead to general confusion about credit repair. You've found the right source of useful credit repair information here.

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