Common Myths About Credit Scores and Credit Repair

I am currently working on a new ebook on credit repair. A person's credit score is an integral part of his/her financial life and ignorance about how credit scores work can be devastating. Our credit scores are constantly being used to make an evaluation on us; for example, banks, credit unions, utility firms, landlords, insurers and even employers. What surprised me the most in the research of my ebook is that approximately 50% of Americans don't exactly know how their credit scores are derived, or what factors are used to compute those three vital numbers. This is sad that a country so financially prosperous, so many people do not understand such a critical information such as the 3 digit number credit score.

Today I will share a few of the misconceptions we have about credit scores and credit repairs:

Myth No. 1 - The Major Credit Bureaus Use Different Formulas In Computing A Credit Score

This is one of the most common myths about credit scores. The truth is that the major credit bureaus, from Experian, Equifax to TransUnion all have a different term for the same score. TransUnion for example, calls it the Empirica, while Experian calls it the Experian/Honest Isaac Risk Model. While these major companies have different names for the credit score, they still use the same formula for coming up with it. While the names used by the major credit companies are essentially the same, lenders often use just one credit report, to analyze your loan application.

Myth No. 2 - Credit Can Be Repaired Instantly

This one leads many people into being victims of credit repair scams. Please understand that credit repair works differently for everyone. No one can promise you that your credit score will be X in 30 to 45 days. 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. One of the ways that these scamers use is issuing you a new tax identification number, usually in a manner that is legally reserved for businesses. You may receive a "blank slate" credit-wise, the part they forget to mention is that if you use it instead of your own identification number you can be charged with fraud.

Myth No. 3 - Closing Old Accounts Helps Boost Your Credit Report

This is one that many of the so called "credit repair gurus" love to use. The truth is that closing old accounts won't affect your credit score, but opening these old accounts will surely hurt your score. In many cases it has the opposite effect by removing history from your credit that you will need in improving your credit score. Shutting-off an old account only helps to make your credit report look young and fresh.

Myth No. 4 - To Repair Your Credit Score, Simply Pay-off All Your Debts

This is another one that our so called "experts" charge you for. Since many people do not understand how credit scores work, they think that by simply paying everything you owe will automatically translate into higher score. You should see their faces after their bank accounts are lower and so is their credit scores. Credit score is influenced and determined by your past credit history, and not by your current amount of debt. Your previous history of late or missed payments will still reflect on your score.

Myth No. 5 - You Can't Fix Bad Credit

With all of the advertisement for credit repair services, there are still those who believe that truly bad credit can't be repaired. 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 No. 6 - Credit repair is too complicated to do myself. I would have to hire an attorney.

In some cases involving a difficult situation, an attorney can be of great assistance. An attorney can also help with clarifying the finer points of your state's laws. However, you can accomplish most if not all of the legal and negotiation-based methods in this report yourself by becoming familiar with your federally given rights and how to enforce them, as well as other creative methods employed credit repair companies, or an attorney.

If you have a bad credit history, it can (and probably will) cost you tens of thousands of dollars more in higher interest payments over the life of a loan. Because you'll be charged much higher rates than you would be with a good credit rating. In almost every case you will be able to improve your credit score. You can easily repair your credit, yourself.

If you choose to do your own credit repair - which is highly recommended - there is one book available that will walk you step by step through the entire credit repair process. But the credit bureaus, credit repair companies and lawyers want to keep this credit repair process a secret. You Can Get Started Today!

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To improve your credit score, you need to do four things: Reduce your debt load, Pay your bills on time, Remove existing errors in your credit report, and apply for credit occasionally.