Since the economic downturn began in 2008, there has been much concern about credit. Loan requirements have been tightened by lenders, even for creditworthy borrowers. It is important to have the correct information about your credit; unfortunately, many borrowers do not, according to a credit specialist.
"Certain facts about credit will affect you and any financial decision you make or are about to make," certified credit and identity theft specialist Julie Macc recently told members of the Silicon Valley Association of REALTORS®.
Below are some top "myth-conceptions" about credit that Macc asked REALTORS® to share with their clients.
MYTH # 1: Too many accounts will hurt your score, so you must close some accounts. 15 percent of your score is based on the average age of your accounts. The older the revolving account, the better. This does not mean you should open several new accounts, but it's a good idea to carry a small balance to keep accounts open.
MYTH #2: I don't need to check my credit because I pay my bills on time. The reality is 85 percent of credit files contain errors and often are merged with someone with the same or similar name. You need to check your report regularly for errors, as well as identity theft.
MYTH #3: Checking my own credit report harms my credit standing. There is a difference between a hard and soft inquiry. A hard inquiry is done by lenders to evaluate whether or not they want to give you new credit. This type of inquiry can affect or harm your score. However, you can check your own credit as often as you want; it won't negatively affect your score at all.
MYTH #4: Paying off an old collection or charge off will increase your credit score. The recent activity of any derogative item will affect your overall credit score. Paying off old debts prior to obtaining any type of loan or mortgage will hurt you greatly because the new date of last activity will be re-aged because you just changed the date of last activity. This derogatory information is reported and stays in your report for seven years.
MYTH #5: Credit repair is against the law. The Federal Credit Reporting Act and Credit Repair Organization Act state it is legal for you to repair your own credit, or hire someone to do it on your behalf. However, Macc cautions that consumers need to beware of bogus credit repair companies that advertise they can remove a short sale, foreclosure or deed in-lieu. These companies do not have lawyers, and only lawyers can file in federal court, which is one of the steps that may be necessary in removing a short sale from your credit report.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.