Aside from a few tips on how to boost your credit score, not a lot of people know what’s true and false about credit reports. To be fair, even when you deal with credit every day, it can be difficult to keep the facts straight. Up your credit knowledge with our myth-busting guide, and see if you know the truth about these credit report myths.
MYTH: A credit report is the same as a credit score.
Fact: While your credit score certainly matters, it is just a small part of the credit report. Beyond your credit score, the credit report can show things like a summary of both your positive and negative credit accounts (also known as tradelines), your total estimated past due and monthly debts, a breakdown of your accounts, and payment history. Don’t forget your credit report will also show if there are have been any prior credit inquiries and when the inquiry was made.
MYTH: “My employer can see my credit score”
Fact: For the most part, most companies will not pull your credit report for employment purposes. While Experian admits that “the biggest users of credit reports for employment purposes are companies in the defense, chemical, pharmaceutical and financial services industries because of the sensitive positions many of their employees hold”, credit reports pulled for employment are different than credit reports in resident screening, and are pulled with your consent. To protect your financial security, account numbers, your year of birth, and references to your spouse are omitted. If your credit report is pulled for employment purposes, the employer will also not see your credit score, and the inquiry will not affect your credit score.
Not to be confused with credit reports, most companies will perform some basic employment screening which can include a social security trace and nationwide and county-level criminal search. Mandatory drug testing is also common.
MYTH: “The credit report will show any evictions that have taken place.”
Fact: While a money judgment against an applicant who didn’t pay their rent may be picked up by the credit bureau as a public record, most evictions won’t appear. The bureaus report less than 10% of the cases filed and they are only ones involving a monetary judgment. For example, if the resident violated the terms of their lease agreement like having an unauthorized pet but was not late on their rent, the eviction judgment would not be on the credit report. Many cases, especially in California, are for possession only.
Regardless, with the roll out of the National Consumer Assistance Plan (NCAP) on July 1, 2017, it’s likely that this slight 10% will be reduced even further. Rather than relying on a low credit score to indicate a civil judgement record, you’ll want to rely on a tenant screening service like CIC™ to provide the eviction data to clue you in.
MYTH: “All credit scores follow the same guidelines; the higher the better.”
Fact: Your credit score is calculated through a credit scoring model (or algorithm) at the time the credit report is pulled, and that algorithm can vary based on the company that developed it and the purpose for the credit inquiry. Take the two major credit scoring models (VantageScore®3.0 and FICO™) for example. VantageScore®3.0 was developed by the 3 major credit bureaus to analyze thin (or minimal information) credit files, and because of it, it can score over 30 million more consumers. FICO™, on the other hand, was developed by the Fair Issac Company and utilizes different models, causing the score to vary based on purpose. It’s also one of the most recognizable credit scoring models. While these two models have the same scoring ranges, there are differences in the way they analyze credit information and your credit score can vary between the two.
Pro Tip: there are many other non-standard credit scoring models out there that are unregulated, provide little consistency, and can be skewed towards the company who designed its interests! Make sure you’re getting your credit from one of the two major models. CIC™ utilizes FICO™and VantageScore®3.0.
MYTH: “You can’t change anything on your credit report.”
Fact: Under the Fair Credit Reporting Act (FCRA), you have a right to dispute incomplete or inaccurate information on your credit report by reporting it to the consumer reporting agency (their contact information should be listed on your credit report). After investigating your claim, if the information must be removed or corrected, by law the consumer reporting agency must do it within 30 days.
Regardless if you knew all of these things, or none of them, it’s important to be actively aware of what’s on your credit report. Learn the basics about credit reports by watching CIC™’s very own Compliance Manager, Caryn Bennett, interview consumers just like you right off the streets of New York in the “Man on the Street” video series. Take advantage of your free annual credit report, and request a copy of your report every time you get a credit inquiry. This will not only help you be aware of your credit standing, but allow you to immediately report any inaccuracies that pop up.
Have you come across any of these credit myths? Let us know in the comment section below and subscribe for more rental tips and tricks!
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