Credit 101

That's sheer and utter balderdash. Even so, consumers hear it every day when they telephone creditors directly: "Sorry, by law that has to remain on your report for seven years." The next time you hear that, know this: The automaton posing as a customer service representative is either spreading lies or ignorance, neither of which is good for your fiscal or mental health.

Sure, creditors want consumers to believe the lie because they can charge higher rates of interest to those who have nasties on their credit reports. As far as they are concerned, the longer the stuff remains on consumer credit reports collectively, the larger their profits. The truth, though, is that nobody is required to report anything about any of us for any minimum length of time to anybody else. Put bluntly, relevant laws like the Fair Credit Reporting Act only serve to place LIMITS upon how long items can remain on reports.

Information by Lexington Law PsychDoc...www.lexingtonlaw.com

Myth #1: The Nature of Credit Bureaus
Myth #2: Your credit report is reviewed carefully!
Myth #3: Including A Credit Statement Is Helpful...
Myth #4: Negative Items Must Remain For 7 Years...
Myth #5: Seeking Help In Reparing Credit Is Unlawful

The 100-word statements can only harm the consumer. First, as we've discussed, such personal statements are essentially never read by potential creditors anyway since the credit score is the usual qualifying determinant. Second, those statements only make it more difficult to embark upon a credit repair effort later because they serve to confirm what's already there. So, for example, let's say a consumer attaches a statement that reads something like this: "These late payments were made only because I was suddenly laid off (or sick), but that unfortunate situation changed very quickly, and we have never been late with this or any other account since."

That may sound responsible, but unfortunately it says only this in reality: "NOTE: yes I really was late paying these accounts. Plus I'm not smart enough to have an emergency fund to cover basic minimum payments if something goes wrong financially. Therefore, I am a bad credit risk."

Even worse, let's say a consumer subsequently learns something about credit reporting and decides to engage Lexington Law to help confront such matters legally and technically. Whoops. Any new challenges will likely be dismissed because there's no need to even take another look: After all, the answer resides right within the consumer's statement which admits fault. Remember that extenuating health or employment circumstances are viewed as little more than lame excuses within the consumer credit industry in any case.

For these reasons, consumer advocate old-timers practically always advise that the first items to be disputed are those silly 100 word statements if any were ever inserted.

Information by Lexington Law PsychDoc...www.lexingtonlaw.com

Myth #1: The Nature of Credit Bureaus
Myth #2: Your credit report is reviewed carefully!
Myth #3: Including A Credit Statement Is Helpful...
Myth #4: Negative Items Must Remain For 7 Years...
Myth #5: Seeking Help In Reparing Credit Is Unlawful

Consider this myth: Your credit report is reviewed carefully

The problem with that business model (i.e. your credit report is reviewed carefully) is that it isn't very scalable. Scouring an individual's credit report takes time, and it also takes skilled (with any luck, that is) human beings to render careful judgments. Unfortunately for fair decision-making, that's just not manageable if you want to extend credit to hundreds of thousands or even millions of people on a national scale. Automation, of course, must save the day, and technology hasn't yet allowed that to include an individualized reading and analysis of everybody's credit reports.

That's where the credit score comes into play. A seemingly wonderful solution, credit scores actually introduce a boatload of other new problems.

So squash myth #2 here and now. Of course creditors want consumers to believe that things haven't changed, that life is as quaint as it was decades ago when customer service meant "personal service," and that they actually pay attention to the report itself rather than treating potential customers as little more than impersonal credit scores.

Information by Lexington Law PsychDoc...www.lexingtonlaw.com

Myth #1: The Nature of Credit Bureaus
Myth #2: Your credit report is reviewed carefully!
Myth #3: Including A Credit Statement Is Helpful...
Myth #4: Negative Items Must Remain For 7 Years...
Myth #5: Seeking Help In Reparing Credit Is Unlawful

Consider this myth: Credit bureaus are official

Even quasi-governmental agencies, and such vital American institutions work alongside your creditors to keep every adult citizen toeing the financial line.

There's so much wrong with practically every word of this fantasy that it's tough for a consumer advocate to know where to begin. To be sure, there isn't anything much official about the credit bureaus at all. Rather, the major consumer reporting agencies -- Equifax, Experian, and TransUnion -- are simply three large companies operating respectably within the private sector.

In fact, in you were so inclined, you could own a piece of Equifax and Experian yourself just by telephoning your stockbroker. (Forget about buying shares in TransUnion for now, though, as it's still privately owned.)

Sadly, too many creditors want Americans to believe that the credit bureaus enjoy an official, quasi-governmental franchise and will somehow punish consumers who dare to fight back against sloppy reporting, usurious APRs, exploitative late fees, inexplicable surcharges, unethical debt collection practices, and worse. Such creditors want consumers to believe that challenging a credit report item is like questioning a courthouse record. Fortunately, that's just not so.

So contrary to the prevailing perceptual reality, there are no official bureaus. And while most Americans perceive their credit reports to have at least the same legal standing as their driving records, the truth is that the government has no role in producing them. Put bluntly, no law mandates a credit report's existence, and such documents may be considered to be no more than a list of allegations remaining to be proven.

Information by Lexington Law PsychDoc...www.lexingtonlaw.com

Myth #1: The Nature of Credit Bureaus
Myth #2: Your credit report is reviewed carefully!
Myth #3: Including A Credit Statement Is Helpful...
Myth #4: Negative Items Must Remain For 7 Years...
Myth #5: Seeking Help In Reparing Credit Is Unlawful