I recently spoke to a group of incredibly smart women who were very concerned that doing one small thing could tank their credit for years to come.
They’d heard so many things - especially from for-profit companies trying to sell them on a credit repair service - and simply didn’t know what to believe. Here are the top five myths I was able to dispel:
Question: Can credit repair companies really fix your credit in 30 days?
Answer: NO! All they can do in 30 days is dispute what’s on your credit report - which, if you know are your accounts, is unethical at best (possibly illegal). The dispute process can temporarily increase your score, but it will plummet as soon as the bureaus figure out what you’re up to. Your best bet is to commit to paying your bills on time every month, and decreasing your debt balance. It will take at least 90 days to see an uptick
Question: will it help if I close my credit cards?
Answer: the longer your card has been open, and the better your payment history with that card, the better it is to keep it open. You can stop using the card regularly (especially if you don’t trust yourself not to run up the balance) and pay down the balance
Question: My identity has been stolen! What do I do?
Answer: Because most of these ladies were not planning to apply for new lines of credit in the near future, I recommended freezing their credit to avoid additional harm. In addition, I advised that they pull their credit (via annualcreditreport.com) to determine if any other accounts have been opened in their name, call the companies where they knew the fraud occurred and explain the situation, place a fraud alert on their credit report, consider filing a police report, change all login and password information to online accounts, and possibly request a new debit and credit card.
Question: A debt collector called me about an old debt. Do I have to pay it?
Answer: Maybe; maybe not. Although I always advocate for paying bills which are rightfully yours, if you’re simply not in a position to do so each state has a statue of limitations as to how long creditors can come after you for an old debt. Likewise, collection items may only be kept on your report for up to 7 years. With that said, should you communicate with the creditor about this debt in any way, the 7-year period starts again.
Question: My student loans are stifling my ability to save or pay down debt. What can I do?
Answer: Fortunately, federal student loan programs are rolling out several repayment options that adjust to your income or other life circumstances. Many private lenders are offering similar programs - contact your lender for more information.
And so it is.