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Seven common Myths About negative Credit:

Myth #1: When I pay off a past-due account, such as charge off or collection account, it will show "paid" and will no longer be negative.

It is almost impossible to restore your credit after you have been reported as delinquent. However, the act of paying off a debt can actually damage your credit. Negative credit is allowed to stay on the credit report for a maximum of seven years, except for bankruptcy which may remain up to ten years. This seven year clock begins ticking on the "date of last activity," or, in other words, when the last action took place on the account. By paying an outstanding, old debt you will change the account status to "paid- collection," "paid- was late," or "paid- was charged off" which will stand out as a very negative listing. Furthermore, in some cases this causes an update of the date of last activity on the day you settle the account. The seven year clock will reset and begin all over again (This should not happen, but in reality, it often does).  Very few large creditors will accept payment in full in exchange for the removal of negative items.  Even if you were 90 days delinquent to American Express for $5,000 and told them you would only pay if they removed all negative remarks from your credit report, they would refuse the terms.  It sounds crazy, but legal obligations between them and the credit bureaus prevent this seemingly obvious transaction.   This is why it almost impossible to clean your credit report once it has been marred.

Myth #2: If I succeed in deleting a negative item, it cannot reappear on my credit report.

Credit bureaus will often temporarily delete a negative listing if they haven't heard back from the credit grantor after thirty days. If the credit grantor reports tardy, say after six weeks and verifies the negative listing, the credit bureau will often reinsert the negative listing on the credit report. This is often known as the "soft delete." Occasionally, though, the creditor simply fails to respond and the negative listing is permanently deleted. If the item is verified by the credit grantor, either before thirty days or after, the item will not be removed.

Myth #3: If I retain an attorney, all negative items can eventually be removed from my credit report.

There are no types of negative listings that haven't been removed from a credit report a thousand times. Some types of negative listings, such as bankruptcy or unpaid debts, are certainly more difficult to remove from the credit report, but this has more to do with the operational systems of the credit bureaus than the severity of the negative credit item. For example, judgments and tax liens are severely negative listings, yet are easier negative listings to remove.  A serious delinquency on your mortgage, in comparison, is firmly written in seven year ink.

A good attorney can help in removing some of your negative items, but it is unlikely that even the best attorney cannot remove all of the items if you have more than one or two.  Also, there is a difference between an attorney and a "credit repair company".  A credit repair company will send out stock letters and for the most part, they will be ignored.  An good attorney will investigate each item and pursue appropriate actions, including filing a lawsuit if necessary.  The biggest difference is the price.  A credit repair company will charge $300 to $1,000.  An attorney will charge $1,000 to $5,000, and even more in the case of long court proceedings.

Myth #4: Disputing the credit report is easy and any consumer can do it for the price of a few postage stamps.

Disputing the credit report is easy. Getting results from the credit bureaus is difficult, complex, and infuriating. It isn't a coincidence that the Federal Trade Commission receives more complaints against credit bureaus than any other type of business except online auctions. Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. Short of sparking mass numbers of lawsuits, the credit bureaus will do everything in their power to discourage consumers from making progress with their credit restoration. 

It is always worth a try, however, as it does occasionally work.  The success rate for genuine errors is about 50%, while for accurate negative items, it is about 20%.

Myth #5: If I declare bankruptcy, I can begin my credit report all over with a clean slate.

Many bankruptcy attorneys do not adequately explain the effects of bankruptcy to their clients. Stated simply, bankruptcy is to the credit report what the nuclear bomb is to war. When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become an "included in bankruptcy" account. Additionally, a bankruptcy filing and bankruptcy discharge listing will appear in the court records section of your credit report for ten years. Because so many negative items are attached to the bankruptcy, it becomes very difficult to remove all traces of the bad credit. 

Bankruptcy is like saying, "I want a new credit file, but I am prepared to wait ten years for it".  The problem is, most of us are not willing to put our financial lives on hold for such a long period of time.

Myth #6: If you are not satisfied with the results of your credit bureau challenge, you may file a "100 word statement" on your credit report explaining your side of the story.  The negative item will then become less severe.

Fortunately, few people are ignorant enough to waste their time with the 100 word statement.  Filing this statement, in most cases, will WORSEN your credit profile by drawing the readers attention to the delinquency.  How many of us would let the criminal out of jail just because he says he was framed? 

Myth #7:  If your credit is ruined by the common practice of identity theft, the major credit bureaus are more than willing to correct your credit file.

Absolutely not.  In fact, the credit bureaus go out of their way to hinder your efforts in correcting your file.  A crime has been committed against you, but they act as if you are the criminal!  Basically, their only concern are the creditors as they, not you, are the paying customers.  There are three major credit bureaus, and it is a very competitive business, so they each do their best to ensure that the customers (creditors) needs are met.  A major credit grantor will have average monthly bills from Experion, Equifax and Trans Union of over $50,000.  They are legally bound under many circumstances to supply the consumer his or her credit report for free, so the consumer is a cost, not a customer.

Since a victim of identity theft is considered "high risk", creditors want to know so that they can steer clear of you.  Even if you are ultimately able to correct your file, there will likely be a line added to it such as "check ID".  They claim that this is to prevent the theft from happening again, but it is really their way of identifying you as a problem consumer, to be avoided at all costs.  The Miami Herald recently ran a story on this troublesome problem, reprinted here with their permission.

Unfortunately, if you have been a victim of identity theft, your only real solution is to create a new, trouble-free identity.  For more information on this troublesome phenomenon, visit