Home » 

The 4 greatest myths about credit reports

Profile Picture
By: NathanielCopeland
on 11th May,2012

Credit reports are an integral part of our day to day financial life.
The 4 greatest myths about credit reports


Credit reports are an integral part of our day to day financial life. Ever since FICO developed the formula to calculate credit scores, it has been the basis for almost every lender when it comes to granting new lines of credit to applicants. Although most people have credit reports, rarely do they truly understand what goes into them. Consumers fret over items and tiny details which don't even make their appearance on a standard credit report.

There are a number of urban legends and myths associated with the credit report and experts from the top three credit reporting agencies are trying to educate consumers in order to help them differentiate between the many myths and realities. Here is a list of the most common myths about credit reports along with the facts.

Checking your credit report frequently will ding your score

The truth is that checking your own credit report any number of times that you want doesn't do a thing to damage your credit score. An expert from one of the leading credit reporting agencies says that even if you view your credit report each and everyday, it will have no impact on your credit score whatsoever. These are known as ‘soft' enquiries in the industry jargon. On the other hand, when a lender pulls your credit score, it is known as a ‘hard' enquiry and too many of these will ding your credit score.

In case you are shopping around for better rates, going from lender to lender, you might think that the series of hard enquiries against your credit report will damage your score. Taking such situations into consideration, credit reporting agencies usually group multiple hard enquiries into one hard enquiry in case they notice that your credit report has been pulled multiple times within a period of 30 days.

Credit reporting agencies have a hand in granting or denying credit

This is an out and out distortion of facts. The decision to grant or deny a line of credit to an applicant is at the sole discretion of the lender. The credit reporting agencies have no hand in the process. Credit reporting agencies specialize in collecting and analyzing financial data and generating reports which indicate the creditworthiness of an individual.

Credit reporting agencies compile and analyze debt related data impartially and don't make any judgments or take decisions based on the information appearing on your credit report.

Credit reports are merged upon marriage and split after divorce

Marriage or divorce has no direct impact on your credit report. Both parties will still have their separate credit reports. In case you live in a state which has community property laws, the data on credit lines granted after marriage tend to merge automatically and show up on the credit reports of both parties. Moreover, if your spouse co-signs a loan or vice versa, the account will appear on both your credit reports.

Marriage won't render you financially responsible for your spouse's debts but in case of community property states like Arizona, Nevada and Texas, which hold both parties responsible for debts incurred after marriage. Joint debts appear on both parties credit report regardless of any divorce settlement or agreement.

Your credit report also includes your credit score

One of the biggest myths about credit reports is that it also includes the individual's credit score as well. The fact is that a credit report lists only the various lines of credit that you have used, both in the past and in the present. The only way you can gain access to your credit score is by paying a fee to FICO. Other than that, you can also get a free copy of your credit score from lenders who have denied you a new line of credit based on your score.

There are other online services through which you can access your credit score for free but the score maintained by such services may not be equivalent to your FICO score. Most lenders depend on the FICO score when they assess an application for a loan although some creditors do use scores from other services as well. It all depends on the type of loan you are applying for and the lender.

Maintaining a good credit score depends, to a large degree, on your understanding of the credit report itself and how the accounts are listed. The many myths about credit reports are nothing but detrimental towards your understanding of how credit reports work.

0
No votes yet


Page loaded in 1.232 seconds.