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8 Lies About Your Credit Report You Need to Stop Believing

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For many, credit reports and credit scores are a mystery. There are so many misconceptions surrounding credit that we often believe things that are far from the truth. It’s important to debunk these lies so that you can improve your financial outlook and not make costly mistakes. Here are 8 common lies about your credit report that many people believe, and why you should stop falling for them. With the right knowledge, you can get your credit report on the right track.

1. “Checking your own credit hurts your score.”

Pulling your own credit report is considered a soft inquiry, which does not affect your credit score. In fact, it’s a smart habit to check your credit regularly. If there are any errors, you’ll want to know immediately. Plus, regularly monitoring your report can help you make adjustments to things like your credit card spending habits, if it is bringing down your score. Be aware that hard inquiries, like applying for a new credit card, will show on your credit report and affect your score.

2. “You only have one credit report.”

There are three major credit bureaus (Equifax, Experian, and TransUnion), and each may have slightly different information. You have three credit reports, not just one. While your score probably won’t fluctuate significantly among the credit bureaus, it’s important to monitor all three. You can choose a credit monitoring service that pulls all your reports.

3. “Your report and credit score are the same thing.”

Your credit report is a record of your credit history. Your credit score is a numerical value based on that report. They’re closely related, but not the same. Both are used when you apply for credit cards or loans. Your credit score and report demonstrate your creditworthiness to lenders.

4. “Paying off a debt removes it from your report.”

Even after paying off a debt, it can remain on your report for up to 7 years if it was negative (like a late payment or collection). Positive accounts may remain longer. While it may seem hard to recover from a derogatory mark on your credit report, it will fall off in time. In the meantime, you can rebuild your credit by making on-time payments and keeping your credit utilization low. Over time, positive activity will help outweigh past negatives in your credit profile.

5. “Closing a credit card helps your credit.”

Closing a card can hurt your score by reducing your available credit. This can raise your credit utilization ratio. It can also potentially shorten your credit history. The number of closed accounts will appear on your credit report. Lenders often prefer to see long-standing accounts that demonstrate responsible credit use over time. Unless there’s an annual fee or another strong reason, keeping the account open is usually better for your score.

6. “You can’t fix credit report errors.”

You can and should dispute errors. Credit bureaus are legally required to investigate disputes and correct any inaccuracies under the Fair Credit Reporting Act (FCRA). If you suspect a discrepancy, you can file a report with that credit bureau. You can also submit supporting documentation to strengthen your case. Correcting these mistakes can significantly boost your credit score and improve your financial opportunities.

7. “You must carry a balance to build credit.”

You do not need to carry a balance or pay interest to build your credit. Simply using your credit card and paying it off on time is enough to build good credit. In fact, you should pay off your cards every billing cycle to avoid paying interest and lower your credit utilization and revolving balances. This ultimately can improve your score. Carrying a balance only leads to unnecessary interest charges without offering any credit-building advantage.

8. “Your income is listed on your credit report.”

Your income is not part of your credit report. Lenders might ask for income during applications, but it’s not something the credit bureaus track. If you have a higher income, you may get a bigger credit limit or be approved for a larger loan. But nowhere on your report does your income show.

Debunking Credit Report Myths

Believing myths about your credit can cost you money, opportunities, and peace of mind. Understanding the truth empowers you to take control of your financial health. By debunking these common lies, you can make smarter credit decisions, protect your score, and build a stronger financial future. Don’t let misinformation hold you back — stay informed, check your reports regularly, and take action when needed. Your credit is one of your most powerful financial tools — treat it that way.

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How to Freeze Your Family’s Credit

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How to Freeze Your Family's Credit

About 15 years ago, I discovered someone had opened an account in my name and charged $1000. Luckily, I caught the fraud early, and the business where the theft occurred gave me my money back. However, that experience spooked me, so I froze my and my husband’s credit within days. At the time, parents could not freeze minor children’s credit, but that has since changed. Just recently, I started the process of freezing my younger children’s credit. If you’d like to do the same, here’s how to freeze your family’s credit.

The Drawbacks of Freezing Your Credit

My husband and I love that our credit is frozen because we feel less vulnerable to identity theft. However, there are a few drawbacks to this peace of mind.

You Must Thaw Your Credit in Advance If Applying for Credit

Recently, we bought a new house. The mortgage broker needed access to our credit scores and history, so I had to thaw our credit for all three credit bureaus. This takes me about 30 minutes each time I have to do this.

You Can’t Apply for Credit Spontaneously

Likewise, if you’re in a store and the clerk offers you a discount if you apply for the store’s credit, you won’t be able to because you have to thaw your credit first. But, again, I don’t consider this a drawback because it helps me avoid spontaneously signing up for credit, but some people feel boxed in by having frozen credit.

Limitations of Freezing Your Credit

While a credit freeze prevents thieves from opening new accounts in your name, it does not stop credit theft entirely. For example, within the last five years, my credit company has notified me three times that someone had fraudulently tried to charge something on my card. Luckily, each time the credit card company caught the theft and issued me a new card. However, in instances like this, my credit freeze did nothing to protect my existing lines of credit that I legitimately opened years ago.

How to Freeze Your Credit

Freezing your credit is simple. You can choose to call each credit bureau or complete an online form. Online is the easiest and fastest. You’ll need to give your name, address, and social security number. You’ll also need to answer some personally identifying information such as former addresses and counties you have lived in. This will allow you to set up an online account with each bureau so you can freeze and thaw your credit.

You can also choose to freeze your credit by mail, but this is the least efficient way and takes two to three weeks.

How to Thaw Your Credit

If you want to thaw your credit over the phone, you’ll need to use the PIN that the credit bureau gave you when you froze your credit.

If you want to thaw it online, log into your account with the credit bureau. A PIN is not required. Then you choose whether you want to temporarily or permanently remove your credit freeze. If you remove it temporarily, you can enter the date you want the thaw to begin and the date you want it to end.

Some credit bureaus used to charge a fee to thaw your credit, but, thankfully, now each of the three credit bureaus offers this service for free.

Why Should You Freeze Your Minor’s Credit?

Your child’s credit is a blank slate for a criminal. Because your child is too young to open credit, you will likely never check to see if their identity has been stolen. Unfortunately, this means criminals can open up a line of credit in your child’s name and have it for YEARS before your child first applies for credit or you check their credit for theft.

Furthermore, unscrupulous relatives can also steal your child’s identity. There have even been cases of parents using their child’s identity and opening lines of credit in the child’s name.

How to Freeze Your Minor’s Credit

How to Freeze Your Family's Credit

Freezing your minor’s credit is more complicated than freezing your credit.

You must freeze your credit at the three credit bureaus, just like adults do. However, to freeze your child’s credit, you must establish both your child’s identity and yours as the child’s parent. You will need to send copies of the following documents to the credit bureaus:

  • Your driver’s license (or other government-issued ID),
  • Your birth certificate,
  • Your child’s birth certificate,
  • Your social security card,
  • Your child’s social security card,
  • A utility bill with your name and address on it

In addition, you’ll need to complete and send in the Minor Freeze Request form from Equifax and Experian. Transunion requires you to complete the Child Identity Theft Inquiry and send in the necessary documentation.

If your child does not have a credit report (which is what you want since it means no one has opened credit in their name), the credit bureau will first need to open a file on your child. Then, the bureau freezes the child’s account. This process can take 10 to 15 days or longer before the freeze takes effect.

When Can a Minor Control Their Credit Freeze?

When minors are 16 or older, they can decide to leave their credit freeze in place, temporarily thaw it, or permanently remove it.

Final Thoughts

Freezing your family’s credit may seem over the top or paranoid, but it’s not. With our increasingly online data-driven culture, our personal information is on many online sites. As the news reminds us, these sites are regularly hacked allowing thieves to sell and use our personal information to their advantage. A credit freeze on each family member’s credit bureau file helps protect them from identity theft and the nightmare that comes from trying to prove you are not the one who ran up thousands of dollars on credit.

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The Building Credit Fallacy

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Building credit is a phrase that you’ll see around the Internet and anywhere most financial experts talk.  It’s basically the act of getting a loan with easily repayable terms, or piggybacking on someones loan, in order to create a positive record on your credit report and thus increasing (building) your credit score.

But, for many, it’s a fallacy that acts as another trap in the debt cycle.  Here’s the scenario.  You need to build your credit.  So, on the advice of a few friends or experts, you go down to the bank and get a $300 loan.  It’s all they’ll give you, and the interest rate is way more than you should spend.  But, you don’t plan on spending any of the money, so you’ve just got to come up with the payments with the added interest and viola! A shiny new positive mark on your credit report.  Except.  Except that after about 2 months, you get a flat tire.  Or you’re favorite band comes to town.  Or your friends want to go out on the town.  Something comes up and you need some money.  You don’t have any.

credit reportWhere do you get your money?  Why from the loan, of course.  You’re gonna pay it off anyways, right.  So, you’ll just have to scrape together a bit more for the next payment, that’s all.  Except.  Except, you don’t scrape together that money.  You use the rest of the funds to pay the next few months payments, but you come up short.  You still need to scrape a few dollars together to make the last few payments.  How’d this happen?!?  It must have been those parasitic lenders, right?

Not quite.  You did it to your self.  And instead of a shiny new positive mark on your credit report, now you’ve got new delinquencies.  And eventually, maybe a nice new collection note.  All because you thought it would be nice and easy to build your credit.  You fell victim to the fallacy.

It doesn’t have to be that way.  Many people pull this off, but it takes a mindset as well as the money.  If you attempt to do something like this, but you don’t have your whole mind in it, you stand a high risk of ending up with negative marks instead of positive ones.  But, if you’re determined to stay out of debt at whatever cost, you can make it work.  It means you can’t touch that money for anything.  No drinking with friends, no Bieber concert, and no new tires.  If you want to improve your credit score, and you’re in a situation where this is the only solution, you’ve got to be ready to make a few sacrifices.

Take a step in the right direction, take responsibility for your actions, and do the financially sound thing.  Building your credit can be that easy.  It’s not a easy task, but once you’ve built it long enough and high enough, maybe you can continue to build it with a nice used car loan of a couple thousand.

Image Credit: credit report by TheTruthAbout…, on Flickr