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11 credit report myths
Cancel a Card, Hurt Your Credit Score
Checking and reading your credit report
You've sent for your credit report and paid extra for your credit score. Now what?
Fixing mistakes on your credit report

Cancel a Card, Hurt Your Credit Score

Everyone knows that your credit score is important to your financial life, affecting the rates you get for mortgages, credit cards and insurance. Improving your score may save you thousands of dollars in interest. So would it help your score if you got rid of a credit card?

"Pay your bills on time and keep your credit expenditures under control, and you won't have to worry about your credit rating," says Craig Watts, spokesman for Fair Isaac Corp., which calculates the FICO score for consumers. "If you're having trouble doing that, sometimes canceling a credit card in an effort to get your credit behavior under control is more important than your credit score."

That's the short answer. But since virtually everything that makes up your credit score depends on something else -- depends on your credit mix, the number of cards you carry, the length of your credit history, your rate of credit utilization and myriad other things -- there is a longer answer.

In most cases, canceling a credit card won't help your credit score. In fact, it may actually hurt your score. You see, your credit score depends on how you shake out in five different credit-scoring categories, each weighted differently when calculating that score.

What counts in a credit score?

This chart shows how Fair Isaac Corp. values the various parts of your credit management to determine your credit score. Source: Fair Isaac Corp.

According to Evan Hendricks, author of the book "Credit Scores and Credit Reports," canceling a credit card potentially can hurt you in at least two of the five categories -- and maybe even a third.

Credit-utilization ratio is key First, canceling a card could upset your credit-utilization ratio, the second most heavily weighted category in Fair Isaac's credit scoring algorithms. For example, assume you have three cards with total available credit of $20,000. Assume further that your outstanding balances total no more than $6,000 of that available credit at any one time. Since creditors like to see a credit-utilization ratio of 30 percent to 35 percent or less, you're in good shape. Now, assume that you cancel a card with a zero balance and a $10,000 credit limit. Suddenly, your utilization ratio jumps to 60 percent, and your credit score drops.

As counterintuitive as that seems, that could happen. Impersonal credit-scoring systems aren't concerned so much with how much available credit you have but with how you manage that credit. And in the credit-scoring world, a 30 percent utilization rate is much better than a 60 percent one. "That's what scoring models want to see, a good utilization rate," Hendricks says.

Furthermore, he says, canceling that card could result in a double whammy to your credit score, "because each card is scored individually, and then all your cards are scored together. (If) you've just canceled the card with a zero balance, (you've) lost a great individual score." Regardless, if you still want to cancel a card, he says, "make sure to pay down your other balances to keep that rate in line."

Older credit is better If you do cancel a card, you can compound your error even further by canceling the card that you've had the longest period of time and on which you've been making regular payments. By canceling an old card, the length of your credit history on open accounts will grow shorter. Both the FICO score and the VantageScore credit-scoring formulas take into account the credit histories of even closed accounts in assessing how long you've been managing credit. However, according to Watts, "that history will finally disappear from the formula when a credit bureau of its own accord removes old credit account information from your credit file."

Barrett Burns, CEO and president of VantageScore Solutions (the company formed by the credit bureaus Equifax, Experian and TransUnion), agrees, but cautions that the scoring algorithm "is weighted such that if you maintain that older account, you're better off because it goes to a pattern of payment history." Nevertheless, he says, if it's an older account that you don't use, and you're paying fees on it, "you're probably better off closing it out for privacy rather than credit score reasons."

There's at least one more nuance to consider, Hendricks explains. If you're intent on canceling a card, cancel a younger card or cancel one on which the credit card issuer doesn't report the credit card limit. "Some credit card companies don't report your credit limit," he says. "You can find out which ones by getting a copy of your credit report."

Number of cards matters Your credit report may also alert you to another reason to cancel a credit card: You can have too many credit cards. Though there is no magic number -- again, because each person's credit situation is so different -- your credit report does give so-called reason codes for your credit score.

There are more than 40 reason codes -- reasons to grant or deny credit -- and up to four are given with your credit report to show what factors affected your score. The most common reason codes, according to Equifax, are as follows.

Most common reasons consumers are denied credit: • Serious delinquency.

One of the reason codes (reason No. 4) tells you if having too many cards has hurt your score. Common sense should tell you that the older you are and the better you manage your credit, the more cards you can have in your wallet before you reach the magic number that triggers the reason code (though you may be surprised to learn that 10 or more cards is not too high in some cases). "In any event, if you're in that rare category and have plenty of credit and low balances on the other cards, canceling a card may help you," Hendricks says.

Though canceling a card probably will not increase your credit score, holding on to one has a number of advantages. For one, Fair Isaac and VantageScore look for a healthy credit mix, a mix that might include a mortgage loan, a car loan, maybe a store card or two, three or four MasterCard or Visa cards and a home equity line of credit, or HELOC, for example.

HELOC effect Of course, it's not simply a matter of having diverse sources of credit. They also want to see responsible credit usage on your part, including credit card balances in the healthy 30-percent-to-35-percent range. "That's a sign of an active and responsible credit person," Burns says. "On the other hand, if somebody consolidates their credit cards or revolving credit down to just a handful of credit sources and has high utilization rate, that will be detrimental to their score."

And this is where credit-score math gets fuzzy. Many consumers have consolidated outstanding credit card balances into a HELOC, both for the lower rate and because they thought doing so might help their credit scores. (For what it's worth, Fair Isaac's Watts wonders whether mortgage brokers, in an effort to generate more loans, first pitched the myth that canceling a credit card would help your score.) Once again, the answer is "it depends."

"Home equity lines of credit are really interesting creatures when it comes to credit scores," Watts says.

What's interesting is that it may make sense to consolidate credit card balances into a HELOC because Fair Isaac may treat the new HELOC as an installment loan rather than a revolving loan. However, Watts points out, that with Fair Isaac that only happens if the HELOC is a large line of credit. Small HELOCs are regarded as revolving lines of credit, much like your credit cards. Thus, as with credit cards, it might help your credit score in some cases to close out a HELOC.

"But in all cases, paying down a real estate-based loan like a mortgage or a HELOC is going to help your score," says Watts.

And that seems to be the key to the kingdom when it comes to credit cards and credit scores: Don't cancel your cards. Pay them off. And after you've done that, don't send them back. Cut them up.

Do that, and you have a zero balance enhancing your credit utilization rate. Do that, and you maintain your credit history on open accounts. Do that, and your credit mix looks good. Do that, and you still have the available credit on the card you cut up. All you have to do is ask for a new card when you need it.

Nevertheless, if you have a compulsion to cancel credit cards, do it the right way. First, cancel your department store cards; then cancel the newest MasterCard or Visa with the lowest credit limit, making sure to close the card from the company that doesn't report credit limits.

"And make sure to keep your credit-utilization ratio in line as you cancel, paying down balances on your other cards, if necessary, to keep it in line," says Hendricks. Score one for the consumer.
Source: Gregory Taggart,

Checking and reading your credit report

If you are applying for a loan or credit, records of your previous dealings with someone else's money are vital.

Whether you get that credit card or not may depend on a network of credit reporting agencies that either share information with, or are owned by, three major credit bureaus. This report is often a critical factor in credit scoring systems that lenders use to issue credit cards as well as mortgages or other loans.

So, if you're considering making a major financial move, it's a good idea to check your credit report to know where you stand. That way you can be aware of, and if necessary take care of, problems before they jump up and derail your plans.

If you find problems, or if potential creditors discover them, take steps to rebuild damaged credit and clean up that record.

If you've made mistakes in paying previous loans, bounced checks, made late payments or had other problems, you may still be able to reduce the amount of damage they will do to your credit with explanations or some basic repair.

Getting your credit report

Obtaining copies of your credit reports is easy. Federal law guarantees everyone one free report per year from each of the main credit reporting agencies -- Equifax, Experian and TransUnion.

You must request your free credit reports through a centralized source. To order online, visit By phone, call 877-322-8228. Or you may complete the form on the back of the Annual Credit Report Request brochure, and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Three other opportunities to receive a free copy of your credit report:

• If you applied for a loan and were turned down, you can request a copy by writing the correct credit bureau within 60 days of the rejection. With your request, you should include a copy of the declined loan application.

• You can also get a free report if you are unemployed, planning to apply for jobs in the next 60 days, receiving public welfare assistance or believe the credit file contains mistakes resulting from fraud.

• Some states already offer a free annual credit report from each of the three agencies. Residents of Colorado, Maine, Massachusetts, Maryland, New Jersey and Vermont are entitled to one free series annually. Georgia residents are entitled to two free annual credit reports from each credit reporting agency.

If you wish to purchase your credit reports, request a copy from each of the three credit bureaus: Equifax, Experian and TransUnion. Checking your credit can cost you as much as $10 per report, although it differs from state to state. You can order by phone, at the agencies' Web sites or in writing. If you write, your letter needs to include your full name, date of birth, current and former address, Social Security number, your spouse's name and your phone number. Each person requesting the report should sign the request.

Time it, then check the details

If you are about to apply for a major loan, such as a house or car, it's important to give yourself time to correct mistakes or make good on delinquent accounts. Depending on the type of loan, you should give yourself enough time.


Once you get the report, you should make sure the following information is correct:

Double-check the following:

Next, make sure nothing has been on the report longer than is allowed by law:

Used-by dates

Get all of them

"Looking at one is a useless endeavor; you need to look at all three," says Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "People tend to pull one and think everything is the same on all of them. That's not normally the case."

The reports will have different information because it's a voluntary system and creditors subscribe to whichever agency they want -- if any at all.

Maxine Sweet, vice president of public affairs at Experian, stresses the importance of ordering the report directly from the credit bureau instead of asking a buddy who works at a bank to pull one for you. Those are written for people who work in the credit industry. The one you get from the credit bureau is designed for consumers.

"The information is the same, but it's much more consumer friendly," she says.

Well, not quite the same. But the differences, Sweet says, are only to make the report easier for consumers to read.

The report sent to a lender will list the credit bureau member numbers of your creditors and it won't have the complete list of every company that's pulled your credit information for promotional purposes, like pre-approved credit card offers.

"If you compared the two reports side by side, the consumer one will have a couple more pages of information," says John Ulzheimer, credit expert with and former business development manager for, a Web site of Fair Isaac Corp. Fair Isaac is the creator of the FICO score, the widely known credit scoring model that is used to determine a person's credit risk.

Understanding the setup

A credit report is basically divided into four sections: identifying information, credit history, public records and inquiries.

Identifying information is just that -- information to identify you. Look at it closely to make sure it's accurate. It's not unusual, Sweet says, for there to be two or three spellings of your name or more than one Social Security number. That's usually because someone reported the information that way. The variations will stay on your credit report; "If it's reported wrong, we leave it because it might mess up the link. Don't be concerned about variations."

Other information might include your current and previous addresses, your date of birth, telephone numbers, driver license numbers, your employer and your spouse's name.

The next section is your credit history. Sometimes, the individual accounts are called trade lines.

Each account will include the name of the creditor and the account number, which may be scrambled for security purposes. You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number.

The entry will also include:

On Equifax's report, your payment history is written in plain English -- never pays late, typically pays 30 days late, etc. Other comments might include internal collection and charged off or default.

"Charged off means the creditor has given up, thrown in the towel," Ulzheimer says. "He's made efforts to collect and written it off."

Other reports include color-coded payment legends. A green OK mark means the consumer is current on payments; a red PP designation means the debtor is on a payment plan. Numbers indicate how late a payment was.

The next section, public records, is the part you want to be absolutely blank. The public records section "is never a good story," Sweet says. "If you have a public record on there, you've had a problem."

It doesn't list arrests and criminal activities, just financial-related data, such as bankruptcies, judgments and tax liens. Those are the monsters that will trash your credit faster than anything else.

The final section is the inquiries. That's a list of everyone who asked to see your credit report.

"Any time anyone gets into the report, it'll post an inquiry," Ulzheimer says. "If you call the credit bureau and ask for a copy, it will be on there. It's a very detailed entry record. It's great for the consumer."

Inquiries are divided in different ways on different reports but they do distinguish hard pulls from the soft pulls. "Hard" inquiries are ones you initiate by filling out a credit application or taking your child to the orthodontist. "Soft" inquiries are from companies that want to send out promotional information to a pre-qualified group or current creditors who are monitoring your account. The soft inquiries are only shown on reports given to consumers, according to Sweet.

Are too many inquiries bad?

You may have heard that a large number of inquiries can have a negative impact on your credit score, but you're probably OK.

"The vast majority of inquiries are ignored by the FICO scoring models," Ulzheimer says. "They're not the steak in the steak dinner."

For instance, the FICO scores ignore inquiries you request yourself. Rate shoppers need not fret either. The score counts two or more "hard" inquiries in the same 14-day period as just one inquiry.

"You could have 30 in two weeks and it only counts as one," Ulzheimer says.

Fixing mistakes

If you find a mistake on your credit report -- an account that isn't yours or a disputed amount -- you'll need to fill out the form that comes with the report.

The process takes time because the creditors have 30 days to respond to a charge of a discrepancy, or 45 days if the dispute regards data in your free annual credit report. As long as a charge is in dispute, that dispute will show up on your report. Longtime lenders say it's common for reports to have errors. Some estimate that as many as 80 percent of all credit reports have some kind of misinformation.

Now, that you've read your report, dispute any mistakes you find by contacting each of the credit bureaus that report the error. Experian, TransUnion and Equifax allow you to do this online, but you may also submit your dispute by phone or mail. If you suspect fraud, get a fraud alert placed on your credit file by contacting the fraud department of the credit bureau and explaining the situation. Alert other appropriate agencies as necessary.

While you can't delete negative but accurate and verifiable information, you can submit a 100-word consumer statement that explains the reason for the negative data. Your explanation will remain on your credit file until you remove it or until the data in dispute gets removed.

You've sent for your credit report and paid extra for your credit score. Now what?

If you're like most consumers, you sent for it because you want to know one thing: Do you have good credit or bad? And just how good (or bad) is it?

But instead of a straight answer for your trouble, your report consists of a list of current and past debts plus a number -- your credit score. And, what you qualify for with your score can vary widely.

"Every company sets its own criteria," says Maxine Sweet, vice president of public education for Experian, one of the three major credit bureaus.

At the same time, credit scores are becoming more important in everyday life, as everyone from insurance companies to potential employers have started looking at credit histories and scores.

"More nontraditional types of entities are using credit scores," says Janet Garkey, an editor with the Credit Union National Association's Center for Personal Finance.

And as credit ratings and credit scores take on more meaning and importance in everyday life, so do the misunderstandings and misconceptions.

Myth: There's just one type of credit score

"There are a lot of different scoring models out there," Garkey says. Making it even more confusing, different creditors will look at different factors, she says. "They don't necessarily look at the same thing."

Many larger financial institutions have their own scoring system (which you may or may not ever see). Credit bureaus also have their own separate scoring system, which they sell to creditors and consumers. And in March, the three bureaus banded together to introduce a new numerical rating system.

Dubbed the Vantage score, it runs from 501 to 990 and also gives consumers an academic letter grade. The bureaus have already started marketing the scores to the credit industry and will start selling the scores to consumers later this year, according to Steve Katz, spokesman for TransUnion.

But when it comes to credit scores, one of the most common versions is the FICO score. "It's the 800-pound gorilla," says Craig Watts, public affairs manager with Fair Isaac Corp., the company that pioneered credit scoring and introduced FICO scores about 17 years ago.

A FICO score can range from 300 (very bad) to 850 (very good). The average is about 723, according to Fair Isaac statistics.

Some reassuring news: The majority of consumers have good credit. Forty-five percent of consumers have a score between 700 and 799, and 13 percent score above 800, according to statistics from Fair Isaac.

Just like the SATs, perfect scores are rare. Even though 850 FICO scores do exist, high scores taper off around 825, says Sweet. "You can't get much better -- that's pretty much walking on water," she says.

Now for the rest of the population: 27 percent rank above 600, and 13 percent weigh in above 500. Only 2 percent have scores of 500 or below, according to Fair Isaac numbers.

Myth: There's only one yardstick for assessing what the numbers mean.

Even with the same brand of credit score, different lenders will set different ranges for what constitutes good, better and solid-gold credit.

And depending on whom you ask, "good" credit will start at a different place on the scale, even with the same type of score.

Consider these diverse views:

Afraid your number is too low? You can't always tell. While some lenders would see a specific number and decline credit, "others will go after you," says Sweet.

While one bank might give a consumer with a certain FICO score favorable rates, another could put that same person into the subprime lending category. The lesson here: Know your scores, and then shop around.

What lenders want to see

Even though the formulas will vary, and lenders will look for different numbers, five basic criteria will usually play a big part in determining your scores and creditworthiness:

Different lenders or institutions will give different weight to various factors when they develop their formulas. Here's how FICO, which is used in the majority of mortgage applications, computes scores:

The breakdown:

If lenders believe that other factors correlate to a higher or lower risk, they may include those in their formula. Some examples: how long you've been at your job, your income, if you have a phone in your name, or whether you rent or own your car or home.

But forget trying to predict the "right" response. Depending on the lender or type of loan, the creditor may want to see a different answer.

What they legally can't consider: gender, race, ethnicity or age (if you're over 65).

Learning your credit score, and what that number means in the real world, "empowers you during the application process," says Arnold. "If you don't know your score, you don't know what you can expect. You're venturing into the whole process blindfolded."
Soure: Dana Dratch is a freelance writer based in Atlanta,

Fixing mistakes on your credit report

You do not send in the information that comprises your credit history -- your creditors do. However, you are responsible for the accuracy of the information about your financial life contained in each of the three credit reports.

Expect that there will be some problems. Statistics show that approximately 70 percent of all reports contain at least one error. These mistakes can sometimes cause you to be turned down for a loan or to be charged the highest interest rate on a credit card.

It's not difficult to get rid of mistakes, just time consuming. As the wheels of correction grind slowly, there may be weeks -- or even months -- of phone calls and exchanging of real mail or e-mail.

Steps to correct mistakes

There are standard procedures to get rid of mistakes on your credit report.

Report credit errors quickly. Even the smallest error could seriously dent your credit chances. If you find a mistake, send a separate letter to each agency where a mistake is found. Be sure to explain the situation in detail and include a copy of the credit report with the faulty information highlighted.

Any error that you find must be investigated by the credit reporting agency (Equifax, Experian or Trans Union) with the creditor who supplied the data. The credit reporting agency will remove from your credit report any errors a creditor admits are there. If you disagree with the findings, you can file a short statement in your record giving your side of the story. Future reports to creditors must include this statement or a summary of it.

The Fair Credit Billing Act requires creditors to correct errors promptly and without damage to your credit rating.

What is an error?

The law defines a billing error as any charge:

Billing errors also include:

Once you have written about a possible error, a creditor must not give out information to other creditors or credit bureaus that would hurt your credit reputation until the matter is resolved. And, until your complaint is answered, the creditor also may not take any action to collect the disputed amount.

The law is on your side

Keep in mind, the law is on your side if information on your credit report is proven to be false but is not removed, according to the Fair Credit Reporting Act. Under the law, you are entitled to actual damages, plus punitive damages that the court may allow if the violation is proved to have been intentional. In any successful lawsuit, you will also be awarded court costs and attorney's fees.

If you feel that a credit bureau has not responded promptly and fairly to your situation, contact the attorney general of your state or the Federal Trade Commission in Washington at 202-FTC-HELP.

You may also sue any credit-reporting agency or creditor for breaking the rules about who may see your credit records or for not correcting errors in your file.

A person who obtains a credit report without proper authorization -- or an employee of a credit reporting agency who gives a credit report to unauthorized persons -- may be fined up to $5,000 or imprisoned for one year, or both.

Who can see your report?

But a lot of people can see that report -- including everyone to whom you have applied for a loan or credit. So be careful when applying for credit.

When the companies you apply to check your report, they can find out who else has been checking your report and determine what, when and how you have been applying for credit. That means if you have been getting turned down and are desperately applying for credit all over town, your potential creditors will know.

11 credit report myths

Most people have heard about the alligators in New York's sewers and the little kid with cancer who wants a zillion postcards. Unfortunately, those aren't the only myths floating around out there.

A lot of the things that people "know" about credit reports and credit scores have about as much validity as those monstrous Manhattan alligators.

1. Paying my debts will make my credit report instantly pristine.

A credit report is a history of your payments, not just a snapshot of where you are at the moment, says Maxine Sweet, vice president of public affairs for Experian, one of the three major credit reporting agencies. As the author of the popular Web column "Ask Max," she continuously reminds people that you can't change the past.

2. Credit counseling always destroys my credit score.

Attending a credit counselor's debt management program is not considered negative in the scoring models.

"We don't want consumers to consider credit counseling to be detrimental to their FICO scores," says Craig Watts, public affairs manager at Fair Isaac Corp., the company that developed the FICO score.

However, if the credit counselor negotiates a lesser contractual obligation, the lender decides how it wants to report that. So if your $500 monthly payment is refigured for $300, the creditor may either legally report that as $200 in arrears every month or reward you for not filing bankruptcy by reporting the account as up to date.

"As long as the accounts are delinquent and not brought up to date, it will be viewed negatively by lenders," says Deborah McNaughton, owner of Professional Credit Counselors and author of "The Get Out of Debt Kit." However, she says, "If everything is current, whether it's a home loan or not, they're not going to view it as negative. The FICO scores are not affected by it." The credit score system ignores any reference to credit counseling that may be in your file.

Although credit counseling does not by itself influence your credit score, it is apparent on the report that you've been through, or are currently in, counseling -- and that is something individual lenders may not like. Or they might never know.

"If they looked manually at your credit report and saw that debts were being repaid through a debt management program, they probably wouldn't open a new account for you," Sweet says. Of course, "you shouldn't be opening a new account if you're in a debt management plan."

However, most lenders these days will never see your actual report.

"They don't look at reports manually anymore," Sweet says. "Some small creditors might, but most of any size use automated scoring systems of one model or another."

Once you've successfully emerged from credit counseling with your formerly tattered credit pieced back together, the history of consistent payments is what matters the most. "Even mortgage lenders will work with consumers who have successfully gone through debt management counseling and will work to get them a mortgage," McNaughton says.

3. Canceling credit cards boosts my score.

Open accounts spells available, potential debt, so better to close them, runs the legend. But experts agree that most creditors want to see at least two or three pieces of active credit to prove you can manage debt responsibly.

And, Watts chimes in, those unused cards lying in your jewelry box aren't wreaking havoc with your score.

"The myth is that they look ominous to potential lenders," he says. "Reality is that paying your bills on time and not being overextended is more important than having $5,000 worth of available credit on a card you're not using. We continue to evaluate this 'total credit limits' statistic, and we simply don't find it falling into one of those highly predictive areas."

On the other hand, extremes never look good. Opening one charge account occasionally to take advantage of a 10 percent offer is negligible. Going wild and signing up for five during the holiday season probably would invite a decreased score, he says.

4. Too many inquiries hurt my score.

Once upon a time, this statement was true. But get with the times -- in this millennium, the credit agencies recognize a shopping mind-set when they see one. If a batch of mortgage or car loan inquiries arrives within 30 days, it doesn't count at all, Watts says.

"Outside that 30-day period, if we locate a mortgage or car inquiry that occurred 180 days ago, and then see more mortgage- or auto-related hits in the accompanying 14-day window, we err on the consumer's side and still assume she's shopping for one item," he says.

"We really feel like we are capturing the true consumer experience and not holding it against them for being an aggressive or smart rate shopper."

Furthermore, there's no such thing as some fixed number of points associated with these inquiries, Watts says.

"Inevitably when a consumer or a lender evaluates a credit file, they think this item must be worth 20 points, this is worth 100 points," he says. "In reality we design the FICO scoring model so that each credit report item is given a reasonable or statistically valid number of points."

In English, that means credit scores are designed to predict the likelihood that you'll fall seriously behind in repaying one of your creditors within the next two years. Some things have predictive value and some don't. Inquiries fall in the middle.

"They're not incredibly predictive, so they're in the model but they don't drive the boat," Watts says.

5. Checking my own credit report harms my standing.

The reporting agencies distinguish between soft and hard pulls. When Target calls to check before issuing its line of credit, the agencies chalk that up as a hard pull and it counts against your score. Personal requests and credit counselors -- if they do it correctly, so insist on this as part of your agreement terms -- fall under soft pulls, which do not reflect negatively on the evaluation.

Using a company that promises credit reports as a perk can turn this myth into a self-fulfilling prophecy, however, McNaughton says.

Because they are merchants in disguise, their freebie costs you. Citizens must go directly to the three bureaus if they want a soft pull. Ditto FICO.

"Pulling your credit scores is quite empowering," says Watts. "You have a choice: You can either be very aggressive with your credit management and pull your score with some regularity or take a more passive approach once a year to see how all those credit cards are actually doing."

6. Credit scores are locked in for six months.

Fair Isaac Corp.'s models are dynamic, meaning that your FICO score changes as soon as data on your credit report change.

"When we calculate a score, for all intents and purposes it then goes away and is recalculated the next time someone pulls your file," says Watts.

7. I don't need to check my credit report if I pay my bills on time.

When the Consumer Federation of America and the National Credit Reporting Association analyzed credit scores in the summer of 2002, they discovered that 78 percent of the files were missing a revolving account in good standing, while 33 percent of files lacked a mortgage account that had never been late. Twenty-nine percent contained conflicting information on how many times the consumer had been 60 days late on payments.

"There can be a lot of other activity going on that you don't have any clue about," McNaughton says.

In her experience, 80 percent of all credit reports have erroneous information ranging from a wrong birth date to accounts you never applied for.

8. All credit reports are the same.

Way wrong. These days, most creditors across the country do report their information to all three major agencies: Equifax, Experian and TransUnion.

But "that was not true in the past," Sweet says.

And, because they are separate companies, the speed in which they update records isn't necessarily equal.

Additionally, the agencies use inquiry activity to update your address, phone numbers, employment status and the like. Because creditors typically pull only one company's report, it's possible that, say, TransUnion doesn't show your current address.

According to McNaughton, she's never seen a client yet for whom all three reports spit out the same records and scores.

9. A divorce decree automatically severs joint accounts.

The judge may have rubber-stamped your plans to divide credit card, car and house payments, but that carries absolutely no legal weight with the creditors themselves, Sweet says.

"We see so many people who, a year or two after the divorce, are just outraged and hurt because their credit report reflects their ex-spouse's missed payments," she says.

Unfortunately, at that point, they are helpless to erase the damage.

Divorcing parties must contact the creditors and either close current accounts or have the booted name sign a letter of consent for this action. And assuming certain debts isn't a unilateral decision on your part, says Sweet. Creditors typically do a credit check on your name and if they don't deem you financially stable enough to assume that $30,000 car loan, for instance, they won't agree to remove the other person.

10. Bad news comes off in seven years.

Some of it does. Chapter 13 (reorganization of debt) disappears seven years from the filing date. But if you filed Chapter 7 bankruptcy (exoneration of all debt), the window is 10 years from the filing date.

On the good-news side, accounts in bankruptcy can be deleted seven years after the date of your first missed payment, so those individual pieces may disappear before the word "bankruptcy" on your report. And if you pay off or close an account that had no delinquencies or problems, it, too, remains on the record for 10 years rather than the previous seven, say Experian experts. Again, this means positive information hangs around longer, as a consumer benefit.

11. I can always pay someone to fix or repair my credit.

Yes, you can clear up erroneous information posted to your account, such as a repossessed car that you didn't purchase in the first place, but if you paid your Sears bill three months late in 1997, that's a hard fact.

Companies claiming to fix your credit deliver on their promises by generating a flood of dispute letters to the credit reporting agencies, which in turn ask the creditor to verify or document the entry. If they cannot, the listing must come off at that time. But if the creditor later does verify or document it, the agency slaps it right back into the file after 30 days.

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