debt
11 things you never knew about your credit report


Using a company that promises credit reports as a perk can turn this myth into a self-fulfilling prophecy, however, McNaughton says. Because they are merchants in disguise, their freebie costs you. Citizens must go directly to the three bureaus if they want a soft pull. Ditto FICO.

"Pulling your credit scores is quite empowering," says Watts. "You have a choice: you can either be very aggressive with your credit management and pull your score with some regularity or take a more passive approach once a year to see how all those credit cards are actually doing."

6. FICO scores are locked in for six months.
Fair Isaac Corporation's models are dynamic, meaning that your FICO score changes as soon as data on your credit report changes.

"When we calculate a score, for all intents and purposes it then goes away and is recalculated the next time someone pulls your file," says Watts.

7. I don't need to check my credit report if I pay my bills on time.
When the Consumer Federation of America and the National Credit Reporting Association analyzed credit scores in the summer of 2002, they discovered that 78 percent of the files were missing a revolving account in good standing, while 33 percent of files lacked a mortgage account that had never been late. Twenty-nine percent contained conflicting information on how many times the consumer had been 60 days late on payments.

"There can be a lot of other activity going on that you don't have any clue about," McNaughton notes.

In her experience, 80 percent of all credit reports have erroneous information ranging from a wrong birth date to accounts you never applied for.

8. All credit reports are the same.
Way wrong. These days, most creditors across the country do report their information to all three major agencies: TransUnion, Equifax and Experian.

But "That was not true in the past," Sweet admits.

And, because they are separate companies, the speed in which they update records isn't necessarily equal.

Additionally, the agencies use inquiry activity to update your address, phone numbers, employment status and the like. Because creditors typically pull only one company's report, it's possible that, say, TransUnion doesn't show your current address.

According to McNaughton, she's never seen a client yet for whom all three reports spit out the same records and scoring.

9. A divorce decree automatically severs joint accounts.
The judge may have rubber-stamped your plans to divide credit card, car and house payments, but that carries absolutely no legal weight with the creditors themselves, Sweet reminds.

"We see so many people who, a year or two after the divorce, are just outraged and hurt because their credit report reflects their ex-spouse's missed payments," she says.

Unfortunately, at that point, they are helpless to erase the damage.

Divorcing parties must contact the creditors and either close current accounts or have the booted name sign a letter of consent for this action. And assuming certain debts isn't a unilateral decision on your part, notes Sweet. Creditors typically do a credit check on your name, and if they don't deem you financially stable enough to assume that $30,000 car loan, for instance, they won't agree to remove the other person.

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-- Updated: Sept. 22, 2006

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