Here are some of the most common myths concerning credit reports.

1) I haven’t done anything wrong so my credit reports must be OK. Your credit reports may have errors that affect your credit standing even if you did nothing to cause the errors. By some estimates, 70% of credit reports have errors. The errors may be lowering your credit score, which will mean you may have to pay a higher interest rate on credit. Morale to this story is to periodically download your credit reports and check for errors. If you find any errors, send dispute letters to the credit reporting agency.

2) Checking credit reports will hurt my credit score. You may check your own credit report as often as you like. There will be effect on your credit score. Confusion may arise from the fact that when you apply for credit and the creditor pulls your credit report, a hard inquiry will appear on your credit report. Excessive numbers of hard inquiries will lower your score somewhat. If you are shopping for a mortgage or car, you may end up with a lot of inquiries, but FICO, the leading source of credit scores, will count inquiries for a car or mortgage in any 30 day period as just one inquiry.

3) If you pay off a delinquent debt, a missed or late payment will be removed from your credit report. Paying off a debt will not remove negative history. The debt will fall off your report once 7 years is passed from the date for first delinquency. Do not believe credit repair companies that promise they can get negative accounts removed.

4) It will help my credit score if I make a payment on an old debt. Payment on an old debt or even paying it off is usually not a good idea. The negative history on the account won’t disappear from your credit report. Plus you risk restarting the statute of limitations in some cases. Paying off a recently incurred debt may make sense. While the history will not disappear, the balance due will reduce to zero which is a positive in terms of your credit score.

5) I need assistance of a debt settlement company. Don’t even think about it. These guys are scam artists. You will just be throwing money away. If you want to negotiate settlements with your creditors, do it yourself. Debt collectors will typically settle debts for some percentage of the debt.

6) It is a good idea to close a credit card account after paying it off. This can actually hurt your score–it eliminates some of your credit history, which is about 15% of your credit score. Plus, closing a credit card account means your utilization or debt to credit ratio will worsen. You can always cut up the card and not use it.

7) Keeping a balance on credit cards improves the credit score. Keeping a balance only costs you interest. Opening a credit card and keeping payments current can help build your credit history if you don’t have much credit history.

8) Daily credit monitoring is  good idea. Some people like daily monitoring, but it is expensive and you can check your own credit reports from Experian, Equifax and Trans Union once a year for free at You can download one of them every four months for free.

9) You cannot get credit if you file bankruptcy. You may be able to get some credit, but it will be costly.

10) All credit scores are alike. FICO is a company that provides the scores most commonly used by creditors. The scores provided by Experian, Equifax , Trans Union and many others are not used all that often by creditors. Which is why they are sometimes called “fako” scores.

Parents should periodically check their children’s credit reports. The reason is that fraudsters sometimes steal the kids’ identity. They know that children likely won’t notice their identity has been stolen and parents don’t typically check their credit reports. A good time to check is when a child is 16. At that point, there is time to take action to correct the reports.

Children should not have credit reports and so if there is a credit report it may be because someone has stolen the child’s identity. A research firm found that one in 40 households with children under the age of 18 had at least one child whose personal information was affected by identity theft.

According to the reasons to be concerned about such identity theft include the possibility a debt collector may harass a child to pay a debt, a child might not be able to open a checking account due to negative credit history that does not belong to the child, or when the child applies for a driver’s license, the child may find someone else has obtained a license in the child’s name.

Medical debt is causing big problems for huge numbers of consumers. The New York Time reports that medical providers and their debt colletors are unfairly hitting consumers with reports to the credit bureaus they have have not paid medical debts.

One seemingly simple medical procedure may result in an avalanche of bills from hospitals, insurance companies and doctors. The bills themselves are often confusing as to what the consumer is supposed to pay and how long the consumer has to pay. Some medical providers charge huge amounts for simple procedures. Hospitals routinely overcharge for items like aspirin and supplies. Consumer are often not told in advance of obtaining treatment how much it will cost.

When an insurance company is slow to pay, the provider often bills the consumer. When the consumer wrongly assumes the insurance company will pay the bill, the provider may send the bill to a debt collector. The debt collector may promptly report the debt to Experian, Equifax and Trans Union knowing such reports are levers to exact payment.

A Texas mortgage initiator in Texaslooked at the credit records of 5,000 applicants and found that 40 percent had medical debt in collection, with the average around $400. Many applicants did not know about the debt.

Richard Cordray, director of the federal Consumer Financial Protection Bureau, has noted that half of all accounts reported by collection agencies now come from medical bills, and the credit record of one in five Americans is affected.

Just one medical bill reported to a credit agency may become a “millstone around your neck” said Mark Rukavina, principal at Community Health Advisors, a health care advisory service. He said mortgage brokers have told him ‘I have these people with great credit. They’ve refinanced before, but now they’ve got this medical bill and even though they’ve paid it off, I can’t get them a good rate..

The NY Times article points out the problem is greater worse. Insurance policies are requiring more patient payments of deductibles and co-payments. Many doctors work for large groups and hospital systems whose bills are generated by computer.

Consumer groups say legislation to needed to curb these unfair practices.

The Consumer Financial Protection Bureau today announced that If you’re trying to correct an error in your credit report at one of the nation’s largest credit reporting companies, there is some good news. Recently, Equifax, Experian, and TransUnion added a function to their online dispute-handling systems that allow consumers to upload supporting documents such as a paid bill, letters, a police report, or proof of identity information to help explain their disputes.

Millions of Americans dispute errors in their credit report. In 2011, Equifax, Experian, and TransUnion together received about 8 million requests disputing the accuracy of information in credit reports.

Upon receipt of your dispute, the credit reporting agencies are required to send dispute to the furnisher, such as a bank or debt collector that reported the credit information to the agencies. Both the furnisher and agency are required to conduct reasonable investigations in this process of the consumer’s dispute. .

Every heard of a Credit Privacy Number (CPN)? It is a nine-digit identification number that looks like a social security number (SSN) and may be used instead of a SSN, for certain purposes.

Consumers are often required to disclose their SSN to the IRS, employers, the DMV, when buying a gun, or applying for a federally insured loan. In certain circumstances, federal law allows consumers to legally use a separate identification number. CPNs are commonly used by celebrities, members of Congress, and witnesses in a federal protection program.

However, CPNs can be misused. Shady credit repair companies advertise the consumers can build a new credit profile to hide their bad credit history. They advertise they will give consumers a CPN to use instead of their SSN. A dishonest person may use a CPN to obtain credit he could not otherwise obtain.

Some credit repair companies tell buyers of CPNs to provide false information when using the number to apply for credit. They are told to use their real name and date of birth, but to avoid listing their current address, phone number, or any other personal information that may connect the new phony credit profile with their old credit record..

Once a CPN is validated that it does not belong to anyone with a credit profile, the credit reporting agencies may create a new credit file thus allowing the individual to apply for credit.
For more information on CPNs, go to Freddie Mac’s article.

As everyone knows, foreclosures and accompanied recession caused tremendous economic damage affecting millions of consumers. These events have adversely affected the credit standing of millions of our citizens. The National Consumer Law Center has published an excellent report describing the problem and what should be done to mitigate the problems.

Consumers who lost their homes due to foreclosure inevitably end up with a report of a foreclosure on their credit reports. These reports knock their credit scores down by 100 to 150 points. Even when a homeowner avoided foreclosure by resorting to a short sale, a loan modification, or deed-in-lieu, the owner’s credit score was adversely affected.

The banks and credit reporting agencies have not lived up to the requirements of the FCRA in many cases in reporting on such real estate transactions. For example, some lenders, such as Chase Bank, report that a foreclosure was started and that the property was sold for less than full value when what really happened is that the property was sold in a short sale. When someone pulls the consumer’s credit report, what is reported is a foreclosure rather than short sale. Under various lending programs, a consumer is eligible to get a new home loan with a short sale having been reported, but not if the report merely references a foreclosure.

When a lender agrees to a loan modification, the results are not always accurately reported to the credit reporting agencies. Worse, some lenders agree to a modification, the owner makes all required payments on a timely basis, and the lenders turn around and trash the owner’s credit reports by reporting they paid late. Such reporting is a violation of the FCRA.

There are many ways to reform the way the agencies report on these events. The NCLC report has some suggestions for reform.

The NY Times reports on a bill introduced by Senator Elizabeth Warren that would bar most employers from requiring applicants to disclose their credit histories or otherwise disqualifying applicants based on poor credit ratings.

Employers are increasingly running credit checks on job applicants with the three national credit reporting agencies only too eager to add to their profits by selling credit reports to employers.

The problem is that research has proven that people with poor credit histories are not automatically poor job prospects. Plus, credit reports are not always accurate making the process even more unfair. A study of low- and middle-income families suggests that many applicants’ poor credit is a result of job loss in the recent depression or medical debts and not because of irresponsible behavior. Such debts do not reliably predict whether the applicant can satisfactorily handle a job.

Target’s data security breach involved millions customers, which may be some sort of record. Credit card and debit card data was lost.

Credit blogger has a full report on the breach.

Under federal law, consumers’ responsibility for unauthorized credit charges is limited to $50 and in most cases $0. Debit card fraud charges for lost or stolen debit cards are limited to $50 if you notify the bank within 2 days and up to $500 afterwards. However, if the physical card is not lost or stolen, the consumer is not liable for any fraud charges if you report the fraud within 60 days after your bank statement is sent. Target has promised to reimburse any losses sustained by it customers.

The Consumer Financial Protection Bureau had made available a consumer complaint database that tracks complaints made by consumers to the CFPB and how they are resolved. The database includes consumer complaints about credit bureaus with the aim of uncovering patterns in the problems consumers are experiencing with credit reporting.

U.S. PIRG, a consumer group, analyzed the data and made this report.

Since the Consumer Financial Protection Bureau began collecting complaints about credit reporting in October 2012, the CFPB has recorded more than 10,000 complaints about credit reporting. Equifax, TransUnion and Experian were the subject of 96 percent of all consumer complaints. Experian was the subject of 38 percent of consumer complaints to the CFPB about credit reporting, Equifax was the subject of 33 percent, and TransUnion was the subject of 25 percent.

25% of consumer’s complaints were about incorrect account information appearing on their credit reports. 20% of the complaints were about accounts the consumers said did not belong to them.

Some 30% of the consumers received money or other relief (such as correcting their credit reports) from the credit bureaus through the CFPB complaints process. Other consumers were closed with an explanation to the consumer. Equifax was most likely to provide non-monetary relief while Experian did so in only 5% of cases. Trans Union offered non-monetary relief in 22% of cases. Consumers continued to dispute the companies’ responses to 18% of the complaints.

Fred Williams, writing in the blog, reports that FICO, the owner of the most-used credit score, has a new free score program that allows lenders who already buy the score to share the score with consumers at no extra cost.

Barclaycard and First Bankcard have announced plans to provide the free credit scores, and other card card companies will do the same in the near future according to FICO.

FICO expects millions of consumers will have access to their scores by the end of this year by logging into their participating credit card company account. The scores will be updated every 60 days, but if there is a change in the interim, some companies, including Barclays will update the score and email the customer with an alert.

Currently, consumers have to pay a fee, such as $15 to the credit reporting agencies or FICO to get their scores unless you are denied a loan on the basis of your score in which case the lender is required under the Dodd-Frank law to communicate the score to you.