Top misconceptions about CREDIT!!!
Updated: Jul 23, 2021
There is a lot of false information being spread about credit!
As there are many misconceptions we hear and see daily, lets start off with the top on the list!
1. Student loans can’t be deleted
When it comes to credit repair and what can be removed, there is NO account that cant be challenged for a immune deletion. The misconception is that the balance is gone as well. That can happen yes but it doesn’t mean that is always the case.
When we challenge items we have help with two of the largest FCRA (fair credit reporting act) Law firms who accounts for 40% of our clients deletions. If one of our attorneys are responsible for the deletion then not only would our clients have a case against the creditors/credit bureaus or collection agencies, the balance is wiped away as well. That includes, student loans, Bankruptcies (no matter the status or type) collections, Repossessions etc.
When negative accounts are removed it improves your debt to income ratio and credibility going forward.
Don't think so ?? Look at the student loan DELETIONS listed below!
Number 2. Being added as an authorized will help my credit!
Being added as an authorized user will help. Well In most cases it won’t but these are very small situations in which it will:
1. Very limited credit
2. No credit at all
Since your score is not calculated by the credit limits you have or how many cards you have, adding more accounts will not help your score. It will only help if you have no credit history or limited credit history and the card you are being added on has a longer history than your own accounts.
Being added as an authorized user can back fire if not done right & here’s how.
Let’s say that the person who adds you onto their credit card had late payments in the past or high usage, you will then inherit their negative history as if it was yours.
This can actually cause your score to drop unfortunately!
Or let’s say the credit card you are being added on was opened 1 year ago and your credit card that belongs to you was open 5 years ago. That would decrease the portion of your score called( AAOA) Average age of account.
Adding an account younger than what’s already reporting may cause your score to drop. Unfortunately at some point we have to open new accounts so the small decrease in points is inevitable but adding someone else's account that’s new when it won’t improve your score is useless. If you have limited or no credit at all , no worries we have you covered. Just click the link below!
3. Checking my credit will hurt my score
Not all credit inquiries are treated the same. There are two types of inquiries
One Is soft and the other is hard credit inquiries.
Soft inquiries will not affect your credit score, but hard inquiries can.
A soft inquiry will occur when you pull your own credit for example pulling your score from credit monitoring sites. You can literally pull your score 100 times per day and no one will know but you.
Soft inquiries can be made by companies too. For example, some companies may pull your score when you are checking for pre-approvals, insurance quotes (yes insurance companies check your credit) or if your credit card company is considering giving you a limit increase. Some creditors will soft pull you for an account review and thats to check up on you. If they see anything they do not like, for example: new collections or any derogatory information, they can close your account if they like.
4. Once an account charges off you are no longer responsible.
Once an account charges off you are no longer responsible??? This is probably the most harmful information being shared and unfortunately we have actually witnessed those who operate credit repair companies tell clients this is well. This is false false false!!!
When an account becomes late the creditor will either hire or sell it to a third party collection agency, charge it off or do both. And yes charging the account off and also selling it to a third party collection agency is legal. You may also see both of them reporting at the same time which is also legal as long as the original creditor is reporting a $0 balance.
When a debt or any asset is charged off, it is taken off a balance sheet. A debt that has been charged off typically happens between 4-6 months of an account being past due. If no payment has been made in that period of time, the accounting rule is that, because it is unlikely it will be paid in the near future, it can’t be carried on the books as a current asset. Therefore, the debt is charged off. But the accounting move by the creditor to charge off the balance due in no way affects your obligation to pay what is owed.
Now here is the kicker, even if you pay the charge off account, it is still considered a negative account which brings us to the next topic below.
5. PAYING OFF COLLECTION ACCOUNTS WILL IMPROVE MY CREDIT
The act in paying a negative and closed out account will erase the balance but will not erase the history of the account. The negative history is what's hurting you, not the balance. Balances are only a factor on open accounts in which utilization is involved. Paying a negative account can also reset the statue of limitations and can also add an additional seven years from the last payment received.
I’ll give you a scenario, You meet someone you are interested in and from the beginning this person seems like the perfect match. Mostly because everything they have showed you has been almost too good to be true so you have nothing negative to judge them by. Now let’s say you were able to see this person past and any mistakes they may have made. What if now, what you seen in his /her past you did not like. Even though this person may be a really great guy or girl now, you still cant get past what they did in the past. Now you have a decision. You can either
1. Accept them or 2. Turn them away.
If you accept them you will more than likely set limitations and have trust issues. You’ll be more than likely keeping them on a short leash until you feel comfortable OR you can just leave.
This is what creditors do. Any past negative behaviors will cause them to use what they can see against so they’ll either:
1. Flat out deny you 2. Accept you but with low limits or high interest rates.
Is that fair since you are trying to change for the better and make better decisions? No but as a creditor they don’t know who you are so they can only use what they can see. Have you ever heard the term, what you don’t see won’t hurt you??
Well that’s credit repair. If they dont know it (negative history) existed then how can they use it against you?
We will never tell anyone to not pay off a debt but will inform you of what happens when you do.
Are you paying to improve your score or your relationship with the company?
Thats the question you would need to ask yourself!
6. CREDIT KARMA SCORES VS. FICO
The biggest misconception with scores is that credit karma scores are used in credit decisions but unfortunately it’s not.
If someone told you to prepare for a test but only study for Half of what’s on the test would you take it? Or would you want to have Full knowledge of what’s on the test to prepare yourself for the best outcome???
Credit karma and most free sites only give you a Vantage score and a small portion of your data reported to the credit bureaus. Most will also leave out Experian which is also just as important as the other credit bureaus.
Did you know that most creditors will pull 1-2 credit bureaus for their credit decisions? What if you improved or viewed your equifax and transunion but not experian and the company you applied for only pulled Experian. Applying for any credit product without access to all three credit bureaus could be extremely risky!
Lets get back to the scores they show you which are Vantage scores. Vantage scores are not calculated the same as fico scores. It can be 5 points off or 100 points off but it’s best to have the most up to date information.
Vantage scores will also make you feel as though a paid collection/paid charge off is a good thing when in all actuality it isn’t.
Below is a prime example of a client who paid a negative account in which credit karma gave him more points but credit check total didn’t!
Here are a few companies that do not give you your fico 08 scores below:
Sites that do give you your Fico 08 score which is most used in credit card and loan decisions listed below:
Preparing for life and your financial future will cost you. Invest in a three bureau credit monitoring service if you are serious about improvement. If credit monitoring is something you feel is not worth having and you can’t afford it then a mortgage is something you should not be focusing on.
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