There have been a lot of great movies in recent years based on mythological characters: Percy Jackson & the Olympians: The Lightning Thief (2010), Clash of the Titans (2010), Immortals (2011), and Thor (2011). Myth-based movies are great entertainment, but myths about your credit score can be expensive. The following three myths about your credit score can end up being very costly.
Myth One: If I Pay Off the Debt, They’ll Report It
One of the biggest myths about your credit score is believing that the company to whom you’ve paid a debt will properly report it to the credit agencies. People often believe that as soon as they’ve paid off a debt, the company will immediately report that to the credit agencies and their score will improve. Unfortunately, depending on the company’s reporting practices, they may wait three months to report the payoff, or they may never report it at all.
What you actually owe a lender and what’s reporting on your credit report are often two different things. It’s crucial to review your credit report regularly and take charge of making sure it stays up to date if you really want to improve your credit rating.
Myth Two: If It’s Not on the Report, I Don’t Owe the Debt
Another myth that hurts consumers is the assumption that if something does get removed from your credit report that you no longer owe the money. For example, let’s say you really do owe $4,000 on a charge off, but we’re able to get it removed from your credit report because it isn’t being accurately reported. That doesn’t mean you don’t still owe the money.
Myth Three: Paying Off Debt Fixes Everything
Many consumers believe that the minute they pay off their debts that their credit rating will increase significantly. But if you’ve had a history of late payments and delinquencies, companies can still report all the late and missed payments for seven years. It can take that long for your credit to fully recover.
Paying off your debts and bringing payments current will help your overall credit score. Making the debt go away, especially if it is in collection, helps in two ways: one, it shows paid instead of still owed. Two, it stops the date of last activity, which means seven years from that date it goes away. Otherwise, it just keeps being a current reporting, and the seven years keeps being seven years in the future.