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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 practically impossible to restore your credit after you have been reported
as delinquent. However, the act of paying off a debt can actually hurt 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,
delinquent 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 120 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 is so difficult 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.
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%.
If I declare bankruptcy, I can begin my credit report all over with a clean
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.
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
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
If your credit is ruined by the common practice of identity
theft, the major credit bureaus are more than willing to correct your credit
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 identitytheft.org.