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Common Myths About Your Credit

In the mortgage profession, you tend to see a lot of credit reports. With each transaction, the clients credit is pulled and reviewed with them. Personally, I go line by line to ensure the reporting is accurate, even when the clients credit score is very strong.  The last thing I want to happen is to not know about an additional debt not listed or to find out that some items are reported erroneously.

When reviewing the details with clients, I find there are many questions / concerns about what is being reported. Clients grow more and more concerned, the lower the credit score. In today's market, the credit score is a huge driver of what a client will get approved for or what fees will be associated with a refinance or a purchase.

Of all the questions, I hear these three the most and I thought I'd talk about them a little.

  • Checking your credit will not effect your credit score.
  • Paying off my bad debt will remove them from my credit
  • Bad information on your credit report can not be changed

First of all, checking your credit too many times can definitely effect your credit score. Its almost like giving the Credit Bureaus a sign that you are going to get yourself into a ton of debt or that you are having financial problems. In many cases, a client is pulling credit because they are getting an additional line of credit OR that they are looking to refinance a mortgage, credit card, automobile, etc. Not everyone needs to pull your credit if you are just ‘shopping', so be careful not to have everyone pull it. It is perfectly safe to have one company pull the report and provide you with the details. If you want to shop around, provide the other companies with your credit report for an accurate quote.

* quick note regarding too many credit pulls... if you decide to move forward with the company that did not pull your credit, the new company will likely need a new credit report, but the report you provided will at least give them the information needed to provide you with an accurate quote. *

The second item should not be a surprise to hear. If you have a bad credit history, and then you pay off that bad debt, the history does not get erased. The credit report will be updated to reflect the payment being made and that the account is no longer delinquent, but the history still remains. That delinquent debt will stay on your credit for years.

* quick note regarding bad credit or past due payments... do not assume that paying off ALL bad debt will improve your credit scores. Sometimes older items (years old) are best left untouched. The damage from those past debts have already done their damage to your scores so there is not reason to refresh that data.  This is not always the case, so it is best to speak with a professional that can provide you with assistance based on your specific situation. *

The last myth is that your past credit can not be corrected. This is probably the largest misunderstanding I speak with clients about. Just because something is on your report, does not make it accurate. Many credit correction companies are in business because of erroneous reporting. Unlike the second myth about past due debt, any history pertaining to an incorrect reporting would be removed as though it did not happen. The key is to have your facts, contact the credit bureau that is reporting the erroneous information, and follow-up for the resolution.

Here are just two examples of erroneous reporting:

  • Payments that were made on time, but were reported as being late
  • Old debt that was paid off but is still being reported as unpaid
  • Past due debt that was not captured in a previously filed bankruptcy
  • Someone else's credit information listed on your credit report (often the case with "Jr" or "Sr")

Not all situations can be handled the same. It is always best to speak with a professional that can provide you with some great instructions on moving forward. There are many ‘professionals' that will claim to be able to assist. Your first step should always be to speak with a personal referral. If your friends or family can not recommend someone, use the internet. Clients are quick to file a complaint, write a blog post, or submit a review when they were unhappy with a service provider. Do you homework!

If you are working with a mortgage professional for your new home purchase or refinance, chances are very likely they can assist OR provide you with a contact that has helped many of their clients in the past.

 

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Are you looking to purchase a Texas home?  Perhaps you love your Texas home but would be interested in refinancing your Texas mortgage to a lower interest rate?  

I'll help you get pre-approved for your Texas home loan and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice.  If you are available to talk, I am available to listen.  Give me a call or visit my website for more details.

Do you want to know all of your mortgage options? Call me today and let's discuss them further.

Texas Home Loan Consultant

Always available for your Texas Mortgage and Home Loan needs!

John R Cannata    P#214.728.0449

NMLS # 322646

Texas Home Loan Expert

Frisco TX Mortgage

      

 

The views expressed on this site are mine alone and do not reflect the views of my employer.

Comment balloon 14 commentsJohn Cannata • October 20 2010 11:51PM

Comments

This was nicely presented in "layman's terms" - easy to understand.  I, for one, have always wondered why having your credit pulled could pull your score down, and now I know!  This is a nice resource, thanks John.

Posted by Cara Marcelle Mancuso, Call a Marana neighbor, I'm THERE! LONG REALTY (Long Realty - Dove Mountain, Marana AZ) almost 8 years ago

John, very nice presentation of the facts. Although I was aware of these points, I'm sure that there are many that aren't...

Posted by TeamCHI - Complete Home Inspections, Inc., Home Inspectons - Nashville, TN area - 615.661.029 (Complete Home Inspections, Inc.) almost 8 years ago

Good Morning Cara & Michael. Thank you for the comments.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) almost 8 years ago

John, excellent post full of great information. We all need to be fully aware of our credit worthiness or lack thereof.

Posted by Charles Edwards Bentonville, AR REALTOR, Bentonville Real Estate Agent and Broker (Coldwell Banker Harris McHaney & Faucette 479-253-3796 ) almost 8 years ago

Our short sale sellers who are sooo strapped for funds often have a real concern about what their hardship will do to their credit....and we are ready with credit repair assistance for the folks who need it most.

Posted by Sally K. & David L. Hanson, WI Realtors - Luxury - Divorce (EXP Realty 414-525-0563) almost 8 years ago

Good to see you John! Your information helps bring truth to the thought process regarding credit scores, thank you for that! And I know firsthand that looking at a person's credit history multiple times can hurt the credit score. I bought my house 12 years ago and they continued to check this and check that and before you knew it...because of that, I had problems buying a new washer and dryer for my home...crazy but true!

Posted by Wanda Kubat-Nerdin - Wanda Can!, So Utah Residential, Referral & Relocation REALTOR (Prado Real Estate South) almost 8 years ago

I didn't know things don't disappear from the credit history when they're paid off.  A family member is working to pay off old debts to improve their credit. Now, I'm at a loss whether this is going to do them any good.

Posted by Joetta Fort, Independent Broker, Homes Denver to Boulder (The DiGiorgio Group) almost 8 years ago

Thanks Charles!

Sally & David - Its a good thing to be in connection with a Credit Counselor you can count on. Someone that truly knows what they are doing and can help your clients.

Wanda - Some creditors just dont know enough about credit, so they can hurt it without even knowing. Sorry you had to deal with it. Im sure you know a lot more now than you did years ago.

Joetta - Im going to send you a private message as well, just in case you are not following this reply. Paying off old debt is not a bad thing, but it really depends on how old it is. Sometimes debt that is showing past due, but is 2-3 years old is better left alone. It has already done the damage to the scores and to pay it off will just refresh the data so it looks more recent. Its best to have someone really take a look at the details and provide some feedback on which debt to focus on and which to leave alone. The damage was already done if these are old items.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) almost 8 years ago

The Mortgage Myth Busters have busted some of the myths in my grey matter! Keep up the good work John!

Posted by Cynthia Bartch, Redesigned Spaces; All Round Nice Gal (Home Stager/Property Stylist & more! Granville, Ohio) almost 8 years ago

Thanks Cynthia!

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) almost 8 years ago

Great Information presented in a way that everyone can understand. 

 

Posted by Gary Miljour, Mortgage Originator NMLS Licensed in AZ and NC (loanDepot) almost 8 years ago

Yea I have heard that long time debts paid off can hurt the tradeline ages!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

Thanks Gary!

Renee - Sure can. Its like reminding the Credit Bureaus that you did something wrong a long time ago. Sometimes its just best to move on.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) almost 8 years ago

Hi John ~ Credit reports can be a real minefield. You've got a lot of excellent advice and guidance here. Good stuff!!

Liz

Posted by Elizabeth Bolton, Cambridge MA Realtor (RE/MAX Destiny Real Estate Cambridge, MA) almost 8 years ago

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