Addressing Some Misconceptions About Rebuilding Credit

Tuesday, November 15th, 2011
Updated: November 15th, 2011
The content is accurate at the time of publication and is subject to change.

While it is very possible to repair your own credit if it has sustained damage due to divorce, job loss or bad financial decision making, there are a few common misconceptions when it comes to re-building a good credit history. Being aware of these credit myths will help make the process of re-establishing a positive credit history a little bit easier.

Myth: It’s too complicated to repair a bad credit score on your own.

If you are dedicated to improving your credit score situation and are willing to do some research and exert a little effort, it is quite possible to improve your score without any outside assistance from a credit repair professional. However, if you feel overwhelmed by debt do not hesitate to seek assistance. There are many wonderful not-for-profit associations available throughout the country that can help you do things like establish a realistic budget, consolidate your payments and negotiate with your creditors. The best thing to do is reach out to these types of organizations sooner rather than later, as once an account has fallen into default your options are more limited.

Myth: Negative events on your credit report remain there forever.

The truth is that it is possible to remove any kind of negative entry from your credit report, although some are more difficult to erase than others. Credit bureaus regard certain things such as unpaid debts and bankruptcies as “worse” than others, making them harder to remove. With regard to bankruptcy, realize that if you file it does not erase your credit report and allow you to start over from scratch. Instead, all of the debts that are included in your bankruptcy will be labeled as such on your report.

Myth: When a past-due account is paid off, it will no longer show up as a negative entry on your credit report.

In fact, when a delinquent debt, such as a debt that has gone into collections or been charged off by your credit card issuer, has been repaid its status changes to “paid collection” but it still remains as a negative entry upon your report. Negative activity remains upon your report for up to seven years, so if you pay off a delinquent debt it is wise to try and negotiate for it to be deleted from your credit report.

Myth: Building good credit offsets negative activity such as late payments.

Actually, having as few as one or two late payments reflected in your credit report can result in having your personal loan or credit card application denied by a lender. If you are currently holding a loan such as an auto loan, a late payment can send your rates soaring. No matter how much positive activity your credit report reveals, if you have any bad or negative activity it can restrict your borrowing opportunities immensely, which is why it is incredibly important to make all of your payments on time and to never, ever simply discontinue making payments. Seek help if you are struggling before you find yourself in a situation wherein you cannot pay your bills.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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