3 Myths About Your Credit and Mortgages

Your credit is a critical part of your mortgage application. It helps a lender decide whether you should get the loan approved, and what your interest rate will be.

It is important to know that some credit myths are not true – you can save a lot of money if you know the truth.

Basics

Three great myths about your credit report

Bad items on your credit cannot be changed
Paying off bad debts gets them off your credit report
Checking your credit will not change your credit score
Derogatory Items On Your Credit Report

Your credit report can change, and does so all the time.

At its most basic your credit report tracks how you handle credit – which companies you have credit with and how you pay them back over time.

Errors can be added onto your credit report, and you can take steps to take them off.

Errors on your credit report can include :

items being reported late incorrectly old bad debts still being reported incorrectly as being unpaid.

You can write to credit bureaus to have items corrected if they are wrong. You will generally need to supply a letter or other documentation from the creditor in question. This letter is usually what you supply to the bureaus.

There may be names of vendors on your credit report that you are not familiar with. These are usually collections companies that have purchased bad debt from your original vendors.

Paying Off Bad Debt Does Not Remove Items From Your Credit Report

Your credit report can be corrected. Having an error on your credit report changed does not mean it is removed. It will only be labeled correctly.

If you have a bad debt that is behind by 60 days and you pay it off, it will still be listed as a payment that was late by 60 days. This late payment will remain on your credit report for several years. Your payment will stop the bad debt from being listed as 90 days late, 120 days late, etc.

Checking Your Credit Report Can Affect Your Ratings

Your credit score can be affected if your credit is checked too many times.

If you apply for a number of different credit lines (credit cards, store cards, etc.) then you may be able to substantially increase your available credit. This means that you can get into a lot more debt, even if you don’t run out and max all those credit cards.