9 myths about credit reports

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I’ve written several articles on credit reports. In this one I explain how to create a good-standing credit report from the ground up, and it’s especially good for young people and new residents in the US. In this one I explain how to improve one’s credit.

Let’s check out some stuff that people say about credit reports and credit histories, and see what truth lies behind them.

If you pay all your bills on time you don’t need to check on your credit report
False.

There are two key elements to take into account when considering reviewing your credit

Esta es la empresa que creó la fórmula
que genera las calificaciones de
crédito. De ahí su nombre. 

report periodically. Nowadays identity theft and fraud are facts of life, and all of us know someone who’s been a victim of either. By examining your credit report regularly, you will be able to detect with a reasonable amount of time, if there are any accounts that don’t belong to you. Additionally, to err is human, and sometimes information about a person is entered wrong; you can show wrong account balances, closed cards showing as still open, erroneous personal information, you name it. The only way to know if there’s a problem is by looking.

Requesting your credit report will make a negative note on the report
False.

There are three types of credit reports generated: the first kind is the one lenders request,

The three credit bureaus.

the ones they obtain when someone applies for a loan. They will be reflected in any requests afterwards, because they are used to see if a consumer has requested a loan and been denied (if a person shows as having requested a loan, but the loan doesn’t show, clearly, he/she was denied the loan).

The second type is also requested by lenders, and it’s the one they use to preapprove people for credit cards and loan offers. Lenders request these using their own databases, and they reflect a very limited amount of information. Clearly, these types of credit reports don’t show on a consumer’s report.

The third kind is the one the consumer requests. The resulting report is a lot simpler than what lenders see as they are meant to be read by people who have no experience with credit reports, and they reflect the person’s credit history and personal data, so that she/he may confirm them. This is why these credit history requests never appear on the consumer’s later reports.

It’s impossible to get a loan if you don’t already have an

existing loan
Not true, but relatively close.

If it were true, nobody would have loans. No, the truth is that, because you build credit from scratch and slowly, in those reports belonging to consumers who are young or new to the US, there’s a high probability that they will have some loans denied. There are ways to build a credit report safe and easily, and here’s how.

Nonetheless, I have to say that there are lenders out there who, even when you have loans and credit cards, will deny you a perfectly sound loan simply for the sake of their own internal policies. This happened to me years ago when I tried to obtain financing from Apple to get an iMac and I was denied, being told, literally, that it was because I did not have five existing loans. It was a completely random answer, but they didn’t give me the loan and back then it really pissed me off.

There is only one credit score and its name is FICO
True.

While each individual Credit Bureau has its own internal scoring system, they all share the FICO score and it’s the one included in credit inquiries placed by lenders. FICO stands for Fair Isaac Corporation, the company that designed the model.

I get my credit score with my free credit report
False.

These scores are not available for review by the consumer because they are created with

The range of possible credit scores. 

specific criteria aimed at financial institutions. That being said, this article explains how you can obtain your FICO score signing up to various free services.

The credit bureaus all belong to the government
False.

They are independent corporations. As a curious tidbit, I will say that every credit card in the United States belongs to either Equifax, TransUnion or Experian. Banks, credit unions, department stores, we all rent the rights to those cards from them. Did you know?

If you bring a delinquent account up to date, it disappears from your credit report
False.

The debt will show as paid, but it will continue to appear on that report for another 7 years.

Plus, if the debt was one that was included in any type of bankruptcy proceeding, it will remain on the report for 10 years.

The best way to get a good credit report is to pay off all your loans, and close them
Half true.

While credit reports compare the amount of debts with their respective balances, as I explained before, not having credits affects your credit report somewhat negatively when you seek a new loan. First, because say you had a $10,000 credit card on which you owed just $2,500 on it, you were showing that you had a debt of only 25% of what you could have, and that said you have healthy borrowing habits. If you close that account, that healthy borrower proof vanishes. Secondly, because some lenders, as I also explained, want you to have a certain amount of debt before lending to you.

Only my loans and credit cards appear on my credit report
False.

Medical bills often appear there. Also, the moment something you owe goes to a collections

agency for non-payment, be it a mobile phone bill, a payment with a check that was returned, those things will show up on your credit report.


There are many myths and misunderstandings surrounding credit reports. If you have a question or doubt, please don’t hesitate to email me here and ask, or to ask any doubt or question on the comments section below.