Your credit is critical for your personal financial health, yet many people still believe common misconceptions about credit scores and credit reporting. Unless you have recently visited a consumer credit law firm in Fairfax to discuss identity theft or inaccurate credit reporting with a credit lawyer, then it may be time to learn a little more about credit reporting.
Myths About Credit Inquiries
It is commonly thought that any type of credit inquiry will adversely affect a person’s credit score. In fact, there is no impact on a person’s credit history when he or she checks his or her own credit. This is a type of “soft inquiry.” A credit report lawyer at a consumer credit law firm is likely to recommend that you check your credit reports frequently for signs of identity theft and erroneous information, since these two issues can indeed have a negative impact on your credit. On the other hand, when you apply for a loan or other line of credit, this is known as a “hard inquiry” and it can affect your credit score. The effect can be negligible. You can shop around for similar type loans by applying for credit multiple times within a period of a few weeks for the same types of credit. However, many different applications for many different types of credit may adversely affect your credit score. Some scoring models recognize these as similar applications (like a car loan) and treat them as one inquiry, but others may not.
Myths About Delinquent Accounts
Another common myth about credit reporting is that negative information is automatically removed from a person’s credit history once that account has been paid in full. In fact, paying off a delinquent account should mean that the account will be listed as “paid.” However, it will remain on the credit history for a set period of time. Collections accounts, for instance, typically remain on a person’s credit history for seven years. If you have paid or settled a collection item, you will have an inaccurate credit report if the account is not actually marked as paid or settled on your credit report. If you do not pay the account in full and the creditor agrees to settle the debt for a lesser amount that will negatively affect your credit score as well.
Myths About Closing Accounts
If you have old credit cards and similar accounts, you might think that closing those accounts would help boost your credit score. Actually, doing this could very well reduce your credit score significantly. This is because one factor that goes into calculating your credit score is the amount of debt you carry relative to your available credit. In other words, if you have two credit cards, each with a $3,000 limit and you close one of them, you will reduce your available credit limit by $3,000 or 50 percent, which could affect your credit utilization ratio.
You are protected from abusive debt collection practices and related inaccurate credit report items under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act in Fairfax. Unfortunately, this does not mean that you are guaranteed to never become the target of these abusive debt collectors. It is important to fully understand your debt collection and credit report rights and how you can best exercise these rights. For help, you can rely on a credit lawyer.
Do Not Pay A Debt That You Do Not Owe
Credit lawyers strongly advise clients against paying a debt that they do not owe. If you are not sure whether you owe the debt, you should request documentation of the amount that you owe, who was the original creditor, and how the debt collector determined the amount owed. Paying a debt that is not yours makes it difficult to dispute at a later date that the account should not be on your credit file because your payment can be inferred as an admission that the debt is yours.
By law, a debt collector is required to tell you the name of the creditor, amount of the debt, and how you can dispute the debt or request verification. Within 30 days of being contacted, you should send a letter to the debt collection agency requesting that the agency validate the debt. Make sure to date and sign the letter, and make a copy for your records before mailing it with a return receipt requested. Keep the receipt for your records. Debt collectors are required to cease collections activities until they fully address your verification request.
Review Your Credit Report
After requesting proof of the debt, you should obtain all three of your credit reports. Check for signs of fraudulent activity, such as accounts that you did not open or loan applications that you did not initiate. If you find any erroneous information, you should file a credit report dispute promptly. You might also contact a credit lawyer for help clearing your name if you have been the victim of identity theft.
File a Complaint
There are many circumstances in which it may be wise to file a complaint with the help of your credit lawyer. You can file a complaint if the debt collector fails to validate the debt, yet continues its collections activities against you. You could also file a complaint if the debt collector uses abusive language, makes false threats, discloses your personal financial information to third parties, or otherwise violates your rights.
Your credit score is integral to your financial health. It can persuade lenders to extend a loan or line of credit, and it can influence the rate you receive. There are many different credit scores sold to consumers, and those scores can differ in scoring models from the scores used by a lender who is underwriting a loan. The best path to a higher credit score is to review a copy of your credit file for inaccurate items. You do not need to pay for your credit score from a credit reporting agency to obtain a copy of your credit file. If you find an inaccuracy, your credit reporting rights include the right to file a credit report dispute in the Fairfax area. A credit lawyer can discuss with you the nature of the dispute that you need to make with the credit reporting agencies, which can ultimately boost your credit score if the inaccurate item is removed. If the inaccurate item remains on your credit report, the credit report lawyer can assist you in taking legal action.
When you watch this video, you will learn more about your credit score with the help of Leslie and Andy, two fictional characters who earn the same salary. Leslie is financially responsible and never misses a payment, whereas Andy lives beyond his means and does miss payments from time to time. As you might expect, Leslie will get a better rate from lenders than Andy. However, both of these characters could benefit from consulting a credit lawyer if their credit scores are affected by errors.