Common Facts and Falsehoods of Bad Credit

The problem with bad credit loans is that many people who suffer from it don't actually understand it or even appreciate why they have to get it instead of normal loans. There is so much mis-information out there made available by all the media types that you can't really blame them. In this section we're going to address some of these misconceptions so you can get a better grip on your bad credit issue.

The first and most annoying myth is that you can somehow improve your credit score by not paying off you bills. There are some people who will tell you there if there are some small bills that you need to pay, it makes sense to simply ignore them and just wait till their history pasts. Their reasoning is that data remains on your credit score for 7 years. The 7 year clock starts from the last transaction for the account. If you pay off your account you will have reset your 7 year clock to start from 0 again. What they don’t tell you is that by settling your account the transaction is actually closed and isn’t written-off. You will most probably get a “paid collection” or “paid was late” remark which is much better than a “written-off” remark which has much worst implications to your credit score.

There is also a myth going around about the deleting of and reinstating of negative items in the report. The credit bureaus have done a very good job at convincing the general public that they really can’t do much about the any negative items on the report. This simply isn’t true. If you have obtained your credit report and you have enough documentation to support the claim that some of the negative items on your report was indeed a mistake then the credit bureaus are legally obliged to remove the items. What happens when items are reinstated is that the credit bureaus have checked back with the debt agent and found that the report was false or that there wasn’t enough documentation to prove otherwise. It is only then that they can reinstate the negative item. If you feel that there are items on your credit report that are wrong, you simply have to take steps to put it right.

There is also some nonsense going around that some negative items in your credit report can’t be removed and are basically set in stone for the rest of your life. This is very untrue. Everything in your credit report will eventually lapse, even the worst credit infractions will eventually have their negative listings expire. As a general reference, most items on your credit report will lapse after 7 years. The worst infractions like bankruptcies or foreclosures will last 10 years, but that is it. There is nothing that will ever haunt you for the rest of your life

Another fallacy that we commonly hear from clients and friends is that starting the credit repair and negative item correction is difficult and should only be attempted if you are a financial professional yourself. While it can’t be considered easy by any measure, it isn’t something that is overly difficult that requires a degree in rocket engineering. The act of starting the dispute is very easy, all you need to do is print out the form available at the credit bureau’s website and mail it into them to start the process going. The hard part is actually going through all the bureaucracy that these large credit bureaus are famous for. From start to finish it will take you multiple phone calls, multiple emails and maybe a nasty letter from a lawyer if necessary. This is all designed to keep the profits to themselves and to discourage customers from making corrections. Just know that it requires tenacity when it comes to dealing with credit bureaus.

There has been increased talk about the benefits of bankruptcy of late. Many clients have come in talking about simply declaring bankruptcy and starting from the new slate. The unfortunate thing is that most people really have no idea what bankruptcy is and how bad it actually is for your credit rating in the long term. If you are fighting a way, bankruptcy would be akin to detonating the nuclear bomb and hoping for the best. In most cases it should be the absolute last thing that you think about. You should concentrate on trying to get yourself out of the bad credit hole instead of throwing in the towel early on. Bankruptcy is almost the worst thing possible in your credit score. The fall-out of the devastating financial decision will haunt you for many more than the average stipulated 10 years. Some financial institutions are even able to pull out back-dated financial records where if you were a bankrupt any loan, even a bad credit loan would be rejected immediately.

Another myth that we commonly hear about is something with regards to the “100 word statement” which basically gives the debtor an avenue to explain their situations in their credit report. Some people believe that the “100 word statement” carries some weight when creditors read the report but the unfortunate truth is that most financial institutions will simply ignore the “100 word statement” paragraph, it is basically an unsubstantiated claim by the debtor and no creditor with any sense would believe that is written there for a second. Financial institutions rely on hard facts represented by the many credit infractions that you have over the years.

There are almost as many misconceptions about bad credit as they are people who don't understand what it means about their borrowing abilities. Our best advice would be for potential borrowers to be acutely aware of these bogus claims and to try their best to improve their credit with this new found understanding.