Credit really shouldn’t be a mystery, but to many people it is.  That is sad because credit impacts all areas of our lives, not only our ability to buy a new home or car.

Did you know that your credit score can prevent you from being promoted at work or even being hired in the first place?

Also, people with bad credit are charged higher interest rates on insurance, and may find it difficult to be approved for some types of insurance at all!

To take the mystery out of credit, I would like to share some of the top myths of credit with you.

1. “Paying my account off on the due date is the best thing I can do for my credit score.”

WRONG! If you pay your account off on the due date, your full balance before the payment is made will be reported to your credit report. This means that even if you have paid the account in full on time, your score will go down because the full amount will be reported as being owed for that month.

What you need to do is pay off the full balance prior to the statement cut date. This date is listed on your credit card statement and is sometimes called the end of cycle date.

2. “Information in my credit bureau can’t be changed!”

WRONG! Anything that lenders can not verify as 100% accurate must be removed from your report under the Fair Credit Reporting ACT. To exercise your rights under this act, you need to initiate a dispute with all three credit bureaus. Don’t make the mistake of disputing with just one of the bureaus in hopes that the others will “catch up”- it doesn’t work that way. Send them a letter stating that there is an error in your report and what it is. To save time, make sure you send any identifying information with your initial request such as your driver’s license, social security card and a utility bill. Also include the credit report number taken from the report where you found the error. Send this letter via certified mail.

Once the credit bureaus have your dispute, they will contact the creditor. The creditor will be given 30 days to respond. If they fail to respond in a timely manner or are unable to verify that the information that they are reporting is accurate, the information must be removed from your file.

3. “I can’t repair my credit myself.”

WRONG! You can do anything and everything that a company would do for you. It just takes the willingness to educate yourself, persistence and patience. Repairing credit is a tedious process, but once you know what you are doing, anyone can do it. The key is following the process, good record keeping and the ability to keep plugging away. It is important to go in with realistic expectations. Your credit didn’t get messed up overnight and it isn’t going to get fixed overnight.

If you do decide to hire a credit repair company, be careful! There are good ones out there but there are also many that are scams.

4. “Paying of any delinquent account will improve my credit score.”

WRONG! While paying off a recently delinquent account can help out tremendously, paying off an older collection account can actually hurt your credit score.

Why is this? Because the amount your score is impacted by an individual account is directly tied to the date of last activity on the account. An old collection has much less impact on your score than a new one. In fact, it has so much less impact that an old unpaid collection may be better for your score than a brand new paid collection. If you pay a collection off, you will update the date of last activity on the account and could potentially lower your credit score.

This doesn’t mean that you don’t want to pay your collection off. What you will want to do is to do what is called a “pay for delete.” To do this, call the lender up and tell them you would like to pay the account off – but only if they will delete any and all negative history from your file. If they agree to this, get a letter from them stating as such. Whatever you do, DON’T make a payment until you have this letter. Read the letter carefully. Make sure that they don’t try to pass off something that says that they will “report the account as paid”. What you want is either the account or the negative history completely removed.