What Are The Facts About Credit Reports?

You might have heard stories about credit and how credit reports work. There is a lot of good information and just as much bad information out there. It's important to separate fact from fiction. Here are some common myths about credit – and the facts:

Myth: You must give permission for your credit report to be issued.

Fact: Any credit grantor with a permissible purpose may access credit reports without the consumer's permission. Examples of those who can access your credit files are credit grantors, collection agencies, insurance companies, and employers.

Myth: The credit repository or reporting company can deny a credit application.

Fact: Credit repositories and credit reporting companies have no power to accept or deny credit. They only collect and report information.

Myth: After you pay off a debt, it disappears from your credit report.

Fact: A credit report shows the whole credit history on any debt that is reported- all debts – even if they're paid off. The bad news is that negative credit information can stay on your report for 7 to 10 years. But the good news is that credit grantors weigh new debts more heavily than old ones. So, a six-year-old bad debt will count for less than several recent years of good credit.

Myth: You're not responsible for debts on a joint account if you didn't make the purchases.

Fact: On a joint account, both parties are held completely responsible for payments. If you pay your share but the other person doesn't, each of you gets the same negative credit rating. Co-signers, who guarantee loans, are also at risk if the primary person doesn't pay as agreed. That means, if someone has cosigned a loan for you, be sure to pay as promised to protect your credit and theirs!

Myth: A divorce decree separates joint accounts.

Fact: Divorce does not cause anything to happen automatically in your credit report. To protect your credit rating, pay off and close all joint accounts, then reopen new accounts as a single account holder.

Myth: Risk scores have replaced a credit report review.

Fact: Credit reports are still the number one tool used by creditors to determine your creditworthiness. Some credit grantors use "merged credit," which is the combined score from at least two of the credit depositories.