Credit repair is a topic filled with misconceptions and bad advice. While many people turn to credit repair to improve their financial standing, there’s a lot of misinformation that could end up doing more harm than good. With so much conflicting information out there, it’s easy to fall for common myths that can lead you down the wrong path.
In this article, we’ll debunk the three biggest lies you’ve been told about credit repair and provide the real facts you need to know to improve your credit score the right way.
- Lie #1: “You Can Pay to Erase Accurate Negative Information from Your Credit Report”
One of the most widespread credit repair myths is that you can simply pay a company to erase negative items from your credit report—even if they’re accurate. Some credit repair companies claim they have special relationships with credit bureaus or access to “secret methods” that allow them to delete accurate negative information. The truth? No one can legally remove accurate negative information from your credit report.
- Why this is a lie:
- Under the Fair Credit Reporting Act (FCRA), credit bureaus are required to report accurate information, whether it’s positive or negative. This means that if you’ve had late payments, collections, or other legitimate negative items, they will remain on your credit report for up to seven years.
- Credit repair companies that promise to remove accurate negative items are either lying or using illegal practices that could get you into legal trouble.
- The truth:
- The only way to remove accurate negative items from your credit report is to wait for them to naturally age off your report. Most negative marks stay on for seven years, while bankruptcies can last up to ten years.
- What you can do is focus on improving your credit going forward by making on-time payments, paying down debt, and avoiding new negative marks. Over time, the impact of older negative items will diminish, and your credit score will improve.
- Action Steps:
- Rather than paying someone to remove accurate negative information, put your effort into disputing inaccuracies. Check your credit report for any errors and dispute items that are outdated or incorrect.
- Focus on positive credit habits going forward, such as reducing your credit card balances and avoiding late payments.
- Lie #2: “Disputing Every Negative Item Will Quickly Boost Your Credit Score”
Another common lie is that you can fix your credit fast by disputing every single negative item on your report, regardless of whether it’s accurate or not. Some people believe that if they file enough disputes, the credit bureaus won’t be able to verify the information in time, and the negative items will be removed. This strategy, however, is not only ineffective but can also backfire.
- Why this is a lie:
- Credit bureaus are required by law to investigate disputes, but if the negative information is accurate, it will likely remain on your report after verification.
- Filing excessive or frivolous disputes can result in the credit bureaus flagging your account as problematic, and they may limit your ability to dispute legitimate errors in the future.
- Even if a negative item is temporarily removed during the dispute process, it will often be re-added once the credit bureau verifies its accuracy.
- The truth:
- Only dispute items on your credit report that are inaccurate or outdated. Legitimate errors, such as incorrect late payments or accounts that don’t belong to you, can and should be disputed. Once removed, these inaccuracies can have a positive impact on your score.
- Focus on building positive credit habits like making timely payments and keeping your credit utilization low. This will have a far greater impact on your credit score than trying to game the system with unnecessary disputes.
- Action Steps:
- Regularly check your credit report for errors, but be selective about the items you dispute. Focus on inaccuracies that can be easily corrected and avoid disputing legitimate negative items.
- If you do file a dispute, make sure to provide documentation to back up your claim. This could include account statements, receipts, or correspondence with creditors.
- Lie #3: “Closing Credit Card Accounts Will Help Your Credit Score”
Many people believe that closing unused credit card accounts will help improve their credit score. This is one of the biggest misconceptions in credit repair. While it might seem logical to reduce the number of open accounts, closing credit card accounts can actually hurt your credit score in multiple ways.
- Why this is a lie:
- Credit utilization—the amount of credit you’re using compared to your total available credit—makes up about 30% of your credit score. When you close a credit card, your total available credit decreases, which can increase your credit utilization ratio. A higher utilization ratio can lower your credit score.
- Closing old accounts can also shorten your credit history, which accounts for about 15% of your score. The length of your credit history is important because it shows lenders how long you’ve successfully managed credit.
- The truth:
- Keep your credit card accounts open, even if you’re not using them regularly. The available credit on these accounts helps keep your utilization ratio low, and the longer the account is open, the more it benefits your credit history.
- If you’re concerned about the temptation to use your credit cards, consider storing them in a secure place or locking them away. Just don’t close the accounts unless there are significant fees that outweigh the benefits of keeping them open.
- Action Steps:
- Instead of closing unused credit cards, focus on keeping your credit utilization low by paying down existing balances. You can also ask for a credit limit increase to further reduce your utilization.
- If a credit card has an annual fee that you don’t want to pay, contact the card issuer and ask if they have a no-fee option. Many companies will allow you to downgrade your card to a fee-free version, which lets you keep the account open without additional costs.
- Final Thoughts: Understanding the Truth About Credit Repair
Credit repair is often misunderstood, and believing these common lies can hinder your ability to improve your credit score effectively. The reality is that repairing your credit takes time, discipline, and a commitment to financial responsibility.
While it’s easy to get caught up in quick fixes and “too-good-to-be-true” promises, the real path to credit repair is through consistent positive habits and understanding how credit really works. By avoiding these myths and focusing on proven strategies, you can start seeing improvements in your credit score that will lead to lasting financial health. Don’t fall for the quick fixes or promises of instant results—credit repair is a long-term process, but it’s one that can lead to lasting improvements in your financial life.