Credit Report Myths You Should be Aware Of

There are several myths that people have about credit reports. Here are some of the most common ones:

Real time updates of credit score

One of the common myths is regarding real-time updates in credit reports. Unlike what is wrongly believed by most people, updates in the credit report are not done in real-time as you charge items or make payments. Your account with the agency will be updated by your lender once a month.

So when you use your credit card at the mall or gas station, only the issuer of the card and the merchant (the approval of both is required for the transaction) are aware of it. The payment can come to the notice of a credit rating agency even a month after the transaction has taken place. So you credit score will also not be calculated based on real-time data.

Sharing of information

Another common myth about credit reports is that agencies share financial information with other credit reporting agencies. This is completely unfounded. The credit reporting sector is a competitive one, with agencies trying to win as much business as they can. So the issue of information sharing between credit reporting agencies does not arise.

Every agency maintains its own database of public record, collection and credit information. There is no database linking, so your loan, credit scores and other important financial information is safe at all times. The agencies are however, compelled by law, to share customer fraud alerts, in which case a credit report can be shared with multiple credit reporting agencies.

Agency’s control over your credit score

While credit reports calculate your FICO score and sell it to lenders, they do not determine or control the factors that count in your score. They only use your financial information from their database to calculate your score in accordance with the FICO scoring system design and model.

So what counts towards your FICO score and what influences it is dependent only on the FICO model with no connection whatsoever with the credit reporting agency. In fact, just like you, your credit reporting agency may be unaware of how the FICO scoring system decides the scores nor the nitty-gritty of the factors influencing the FICO score.

Reporting of data more than 10 years old

Unlike the common belief, a credit reporting agency can report negative credit items that are longer than seven to ten years, which is an exclusion to the well-known 7-10 year rule. Negative items can be reported by credit agencies for (a) credit transactions involving a sum exceeding $150,000 (b) life insurance policies with an excess of $150,000 face value. (c) certain employment purposes when the salary exceeds $75,000.