Credit Repair - Debunking the Top 10 Myths

Credit score. We've been told forever how important it is. Often, you don't feel the brunt of bad credit until you miss out on that apartment or have higher interest rates on credit cards, a mortgage, or other loans. If your credit is less than perfect, how do you improve it? If you're on a quest to improve your credit score, you've likely come across plenty of myths and misinformation, and it can be challenging to separate fact from fiction. Today, Ivory Becker, owner and founder of Incite Strategies, will clear the fog and debunk the top ten credit repair myths that could be preventing you from reaching your financial goals. Ivory has spent 14 years in the financial industry, and today, through her company, Incite Strategies, specializes in helping people repair their credit and realize their financial dreams.

Myth #1: You Can't Repair Bad Credit

One of the most persistent myths is that if your credit score takes a hit, there's no coming back. The truth is, no matter how low your score, there are steps you can take to repair it. It's true that rebuilding credit takes time and consistent effort, but with the right strategies and determination, you can see improvement.

Myth #2: Credit Repair Companies Are All Scams

Sure, there are some shady operators out there, but not all credit repair companies are created equal. Some are genuinely committed to helping individuals improve their credit and navigate the complex world of credit reporting. The key is to do thorough research, read reviews, and ask for recommendations from your trusted professionals, like your mortgage loan officer. Reputable credit repair companies help you understand your rights under the law and have a strong understanding of the different credit score algorithms and how they function.

Myth #3: You Need a High Income to Repair Credit

Contrary to popular belief, you don't need a six-figure income to repair your credit. Your income doesn't even factor into your credit score! While having a higher income can make the process of repaying debts and managing credit easier, it's not a prerequisite for credit repair. There are strategies and techniques that can be applied no matter what your income level is.

Myth #4: Credit Repair Is a Quick Fix

Sorry to burst your bubble, but credit repair isn't an overnight sensation. It takes time and patience to see significant improvements in your credit score. Legitimate credit repair involves reviewing your credit report for errors, disputing inaccuracies, creating a budget, and developing responsible financial habits. It's a journey, not a sprint. If you are promised your credit will be restored in 30 or 60 days, that's a red flag.

Myth #5: Closing Old Accounts Boosts Your Score

Here's a common misconception that could inadvertently harm your credit score. Some folks believe that closing old, unused accounts will boost their credit score. In reality, closing old accounts can potentially hurt your credit score by affecting your credit utilization ratio and the average age of your open accounts on your report.

Myth #6: Paying Off Collections Removes Them

Dealing with collections can be tricky, and simply paying them off doesn't guarantee their removal from your credit report. Paying a collection account may update its status to "paid," but it will still show up on your report. Unfortunately, a paid collection does not help your score in most credit score algorithms.

Myth #7: You Only Have One Credit Score

Surprise! You have multiple credit scores, and they can vary depending on the scoring model and the credit bureau. The three major credit bureaus—Equifax, Experian, and TransUnion—may use different scoring models like FICO Score or VantageScore, resulting in slightly different scores. Beyond that, there are different versions of these FICO and VantageScore models that have been released over time. Lenders choose which of these models they want to use to qualify you for different lending opportunities.

Myth #8: Checking Your Credit Hurts Your Score

Are you worried that checking your credit score will harm it? Fear not, we're here to dispel this common misconception. There are two types of credit inquiries: hard inquiries and soft inquiries. A hard inquiry occurs when you apply for credit, like a loan or credit card, and can have a small and temporary impact on your score that is quite minimal. Although you see them on your report for two years, they only impact your score in the first year, and this is usually only by a couple of points. On the other hand, a soft inquiry, like checking your own credit or a background check, does not affect your score at all.

Myth #9: Bankruptcy Ruins Your Credit Forever

Bankruptcy isn't a life sentence for bad credit. While it's true that a bankruptcy filing will remain on your credit report for several years, it doesn't mean your credit is ruined forever. In fact, many people who have gone through bankruptcy have been able to rebuild their credit and achieve good scores in the long run with proper guidance on re-establishing positive credit.

Myth #10: You Don't Need to Check Your Credit Report

Neglecting your credit report is like driving blindfolded. Your credit report is a comprehensive summary of your credit history and financial behavior. Regularly reviewing it is crucial to catching errors, detecting potential identity theft, and ensuring all information is accurate. I can't tell you how many times we have had clients come to us in the midst of the lending process, not realizing they had a credit issue because they were not monitoring their reports.

There you have it, the top 10 credit repair myths - debunked. Armed with this knowledge, you can confidently navigate the credit repair landscape. Remember, credit repair is about patience, persistence, and making informed financial decisions. For more personalized help, CLICK HERE to set up a free, no-obligation credit repair consultation with Ivory and get on track to realizing your financial dreams.

Bonus Myth: You Have to Have Really Good Credit to Get a Mortgage

This isn't true. Though having good credit is helpful and can lower your overall costs, an FHA loan is a great mortgage option for those with not-so-great credit. This government-insured mortgage program helps people with credit scores as low as 580 qualify for a mortgage. For Veterans, Servicemembers, and eligible surviving spouses, a VA loan is another great option. To learn more about FHA/VA loans, CLICK HERE and reach out to Loan Officer Todd Davidson with UMortgage.

To get notified when we release future blog posts, CLICK HERE. In the coming months, we will be doing blog posts on retirement communities, healthcare, financial planning, insurance, and other topics that would be of interest to those living in or moving to Oregon.