4 Misperceptions about Credit Reports

Updated on April 20, 2020

A credit report is a document that contains your credit histories established with the help of data furnishers like landlords, banks, and credit unions.

Although the nature of a consumer credit file is not complicated, it can be prone to misinterpretation. The deeper your understanding of it, the more reliable the information you could get from a home loan calculator in Utah, New Mexico, or Oklahoma.

Since your creditworthiness dictates the favorability of a mortgage, a credit card, or any other financial product you want to qualify for, you ought to dispel the most common myths about credit reports before application.

1. You Only Have One Credit Report

A credit report is generated by a credit bureau, a data collection agency that serves as the ultimate custodian of consumer credit information in the United States. There are numerous credit bureaus in the country, but the Big Three are Equifax, Experian, and TransUnion.

In other words, you are likely to have at least three credit reports out there. There is no definitive literature that says which lenders check which documents when making credit decisions, so you have to pay close attention to all of them.

2. Monitoring Credit Reports Drive Down Credit Scores

You must be fully aware of every piece of information that is added to your credit reports. One clerical error could adversely hurt your credit scores.

If you think that regularly checking the contents of your credit reports will tarnish your creditworthiness, you are mistaken. Requesting a copy of your credit reports for review is an activity called a “soft inquiry.” It will not affect your credit rating whatsoever, and creditors will not know about it.

3. Credit Reports Should Reflect the Same Information

Credit reports are generated by independent credit bureaus that do not compare notes. The fact that data furnishers are not required to submit credit information contributes to the distinctions between such documents. And those that provide consumer data could decide not to report to all credit bureaus.

Apart from having different pieces of data, credit bureaus use distinct credit scoring models too. Nevertheless, mortgage lenders trust the three of them and look at all of the reports when vetting loan applicants. Financial institutions use the middle score instead of the average of all, though.

4. All Negative Items on Credit Reports Are Disputable

Filing a dispute is an essential step toward removing a negative item from a credit report. Although it could take anywhere between 30 and 45 days to process a request, a successful dispute is still one of the best ways to jack up your credit scores quickly.

However, you could only dispute an incorrect negative item. If a credit repair company promises to rid accurate detrimental information of your file, it is a scam.

Understanding the basics of credit reporting matters to take the right path toward creditworthiness. Sharpen your ability to read credit reports to keep your credit scores as high as possible to qualify for the most favorable financial products on the market.

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