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Credit Repair Myths Exposed!!!

The media, newspapers, Internet, etc., are full of stories and news about credit repair companies and the state of individual credit in today’s economy, but some of the information concerning credit repair is inaccurate.  Don't be fooled by misinformation!!

MYTH: The credit bureaus (Equifax, Transunion, Experian) are government agencies.
TRUTH: The credit bureaus are for profit companies. They collect data to sell to lenders/providers and are not affiliated with the government. They are governed under the Federal Trade Commission. Equifax & Experian, for instance, are publicly traded and both boast annual profits exceeding 275 Million Dollars.

MYTH: Credit repair is illegal!
TRUTH: Not only is credit repair legal, but you are guaranteed these rights by the Federal Fair Credit Reporting Act. The Federal Trade Commission receives more complaints against credit bureaus than any other type of business.  Not surprisingly, the credit bureaus have declared war against credit repair companies and criticize them in the media.  The credit bureaus try their best to undermine the process, but the Fair Credit Reporting Act is your defense against misleading credit repair propaganda.

The credit bureaus would make you believe that they are willing to help you with the credit repair process and they even provide forms and web pages for you to use for your dispute. But these tactics are deliberately designed to be ineffective and hinder your ability to repair your credit. The credit bureaus are primarily interested in protecting their profits and interests. So they will do everything in their power to discourage consumers from seeking out professional help and making progress with their credit repair.

MYTH: Credit Repair doesn’t work!
TRUTH: This is one of the biggest myths about credit repair. Under the Federal Fair Credit Reporting Act, if an item is not 100% verifiable, accurate or up to date, it must be deleted.

MYTH: There's nothing I can do about my low credit score. My credit is destroyed forever!
TRUTH: As long as you start today, you can rebuild your credit. You'll eventually get your debt and credit under control by:

     1.  Paying your loans and credit cards on time
     2.  Looking for better credit options
     3.  Learning more about debt and credit
     4.  Eliminating erroneous entries on your credit report

MYTH: When an item is successfully deleted, it will eventually come back in my credit report.
TRUTH: The credit bureaus have cleverly spread this myth through the news media and government agencies to discourage credit repair.  Under the new Fair Credit Reporting Act (FCRA), the credit bureaus must follow strict procedures to notify you if they decide to re-report an entry on your credit report. These new procedures have reduced the frequency of the re-reporting of listings, and increased the risk of lawsuit for the credit bureaus.

MYTH: If I always pay my credit card balances in full, I will have the best credit rating.
TRUTH: The problem is that if you have no balance, you will also have no payment history.  You’ll want to leave a little bit of balance on your credit card every months (ideal amount is 1%), to show that you can manage your debt and pay on time.  It’s not recommended to pay off a card and leave it with a “zero” balance because after 6 months, the account rating might change to "inactive."

MYTH: A credit rating can be fixed by just paying off negative items.
TRUTH: Many people think that paying off a collection or making a late payment current will magically fix their credit report. By paying an outstanding or delinquent debt, the account status will change to "paid collection," "paid was late," or "paid was charged off," which is a better mark, but still stands out as a negative listing. Paying an old debt does not erase the fact that at one time you were not paying it as you agreed. Negative items can stay on the credit report for a maximum of seven years, except for bankruptcy which may remain on the credit report for ten years.

MYTH: I can’t fix my own credit.
TRUTH: You can attempt credit repair without professional help. It's wise to attempt to correct your own credit report with the proper information and guidance. However, when you can’t get results because the process has become more complex and frustrating, it is recommended to hire an expert. Some people don’t have the time to understand the credit repair process and the laws governing them. So they prefer to hire a professional, such as GCM, to help them identify and fix any discrepancies on their credit statement, which is essential in guarantying that their credit score is properly revived.  For instance, let’s say that you are ready to file for your taxes.  If you don’t know the process, then you hire a professional CPA.  You can also represent yourself in a court of law, but if you want a professional, then you hire an attorney.  Experience and knowledge from a specialist will help you through the minefield of the credit bureaus.  Therefore hiring a credit repair company isn’t a bad thing, but consumers must be careful in choosing the right credit repair company to achieve the best results.

MYTH: By changing my social security number or by using an EIN tax number, I can fool the credit bureaus into creating a completely clean, new credit file under my name.
TRUTH: This is NOT legal!
Using a new social security number to establish credit is illegal and can land you in jail!

MYTH: If I declare bankruptcy, I can begin my credit report all over with a clean slate.
TRUTH: Many bankruptcy attorneys do not adequately explain the effects of bankruptcy to their clients. When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become attached in the bankruptcy listing. Additionally, a bankruptcy filing and bankruptcy discharge listing will appear in the court records section of your credit report. Because so many negative items are attached to the bankruptcy, it becomes very difficult to remove all trace of the bad credit. If at all possible, you should avoid bankruptcy.

MYTH: I can pay less than the minimum payment without penalty.
TRUTH: Unfortunately not. You must send in at least the minimum amount required by the due date or the creditor may consider your payment late and charge additional fees. The creditor may even report it to a credit bureau.

MYTH: I can't be sued after Statute of limitations (SOL) has expired.
TRUTH: The statute of limitations (SOL) is the maximum time a collection agent can take legal action on a debt and it varies state by state. Once the SOL has passed there is only one circumstance where a debt collector can take legal action; if the debtor reaffirms the debt. This is a common mistake from consumers when they make a payment or a promise to pay on the phone or in writing, on an account with an expired SOL. The debt can be re-aged and the SOL starts all over again.

MYTH: A divorce decree separates joint accounts.
TRUTH: 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 owner.

MYTH: A couple of negative items won’t hurt my credit as long as I have more positive items.
TRUTH: Even one or two negative items can be an unacceptable barrier to credit approval and trigger a credit card or personal loan denial. The slightest amount of negative credit will cause the interest on an auto loan to skyrocket.

Creditors such as mortgage companies, automobile lenders and credit card companies reserve their best rates for customers with very high credit scores. The rates and terms get worse as the credit score goes down. A 50 point increase in your credit score can save hundreds of thousands on a home loan or be the difference between qualifying for a home loan or even getting denied.

MYTH: Using debit or prepaid cards will help rebuild my credit.
TRUTH: Debit cards are just like your bank accounts. They do not get reported to the credit reporting agencies and thus, cannot help you rebuild your credit.

With prepaid credit cards, you must also deposit funds before using the card just like a debit card. The issuer does not hold the deposit as security for future payments like a secured card. Instead, each transaction or withdrawal you make reduces the balance you placed on the card. In this way, a prepaid card is very similar to a bank debit or ATM card.

Unlike a secured credit card, however, transactions with a prepaid card generally are not reported to the three major credit bureaus.

Whether you're starting out or starting over, a secured credit card is a great way to build your credit. A secured credit card looks and acts like a regular MasterCard or Visa. The only difference is that you deposit money into a saving account as collateral for your credit line rather than having the banks extend you credit.