Three Things Nobody Tells You About Your Credit

If you’re like most Americans, you probably learned absolutely nothing about credit as a part of your high school or college education. As a result, many young adults enter the “real” world grossly unprepared when it comes to their credit management skills. This is very unfortunate since credit can have such a profound impact on your financial well-being and success.

So how are we learning about credit? Unless you were lucky enough to have a loved one teach you — or wise enough to research and study the topic for yourself — it’s normally all about trial and error. Even if you have taken steps to educate yourself, credit is a broad topic and there are many myths and unknowns. Here are three things you may not have realized about your credit:

The Accuracy of Your Credit Reports Is Your Responsibility

You certainly have the right to expect your credit reports to contain accurate information. In fact, you are conferred this right, among many others, in a federal consumer protection statute called the Fair Credit Reporting Act. Yet while you have the right to expect credit report accuracy, the only person who can really verify that accuracy is you and you alone.

When the credit bureaus receive information about you from a lender or other data provider, they generally have no reason to doubt the information’s accuracy. Once the information is received, the credit bureaus will load it into their credit file system and it will ultimately appear on your credit reports. This means that an incorrect account, wrong balance, or invalid late payment could potentially show up on your credit reports without your knowledge.

Furthermore, the credit bureaus themselves make their own mistakes from time to time. In fact, the Federal Trade Commission estimates the existence of over 40 million mistakes present on the credit reports of U.S. consumers.

Credit reporting mistakes happen. This is a fact. Undetected mistakes can remain on your reports, damaging your credit scores and potentially making it difficult or impossible for you to qualify for new financing. It’s up to you to routinely check your credit reports for and to alert the credit bureaus if you discover a mistake. You can check them for free, right now, at

You Shouldn’t Focus Solely on Your Credit Scores

You read that right. Yes, of course your credit scores are important. Credit scores can impact your ability to qualify for a loan, a credit card, and can even have an influence over your insurance premiums. However, if you’re working to improve your credit, then focusing solely on your credit scores can be a mistake.

Between VantageScore, FICO, and the countless other non-branded credit scoring systems in use today, there are hundreds or thousands of three-digit combinations commonly referred to as credit scores. You’ll never see them all, and you’ll drive yourself crazy chasing them around. If a lender pulls your credit scores today and you check them online 20 minutes later, it’s almost guaranteed there will be some difference between the sets of numbers you receive.

Instead of focusing on your credit scores, you should shift your attention to your credit reports.

Although hundreds of credit scores are commercially available, the good news is that every one of those scores is based on the same information – the data contained in your credit reports. Establishing positive credit management habits such as paying off your credit card balances in full each month, making all payments on time, and only applying for credit as really needed, should ultimately begin to help improve your credit scores no matter who is pulling them and what brand they’re using.

Paying Off Negative Accounts Won’t Undo Their Damage

When most consumers set out to try to rebuild their damaged credit, they start by trying to pay off or settle old derogatory accounts. Yet, as of now, paying off defaulted accounts will not erase the negative impact which the account had on your credit in the first place, nor will it cause the account to be removed.

I qualify that statement with “as of now” because some time in 2017 a program called the National Consumer Assistance Plan, or NCAP, may alter what negative information will remain on consumer credit reports.

Credit scoring models like VantageScore and FICO were originally designed to pay attention not so much to the balances on your derogatory accounts, but the fact that a negative occurred at all. As a result, paying off that $2,000 defaulted credit card account probably will not lead to a higher credit score. You may ask “why?” The answer is that credit scoring systems are not designed to predict the likelihood that you’ll default for a certain amount of money, but are designed to predict the likelihood that you’ll go seriously delinquent on any account, regardless of the amount.

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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

John Ulzheimer

Contributing Writer

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.