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Think you don’t have a credit score because you either don’t have credit cards or you seldom use credit? Well think again. A popular growing trend has a handful credit bureaus looking at your various bills to determine a credit. While still a little unconventional, many lenders today are more willing to take into account anything that adds financial history to a borrower’s status. The recent mortgage meltdown has added to this growth.

Companies such as Pay Rent, build Credit (PRBC), First American Credco, LexisNexis will help borrowers establish credit for a fee by looking at alternative payment information such as your utility, phone, and rent bills. These firms will dig around for any other public records that might help establish a credit rating of some kind. Basically, they gather as much information to provide to the lender so that the lender can determine whether or not you’ll make good on a loan.

So this is definitely a different approach, and a viable alternative to those that don’t have much established credit under the standard credit models and systems. Where FICO scores seem king among Equifax, Transunion, and Experian, these new credit ratings are becoming more popular.

http://www.businessweek.com/magazine/content/08_16/b4080052299512.htm?campaign_id=aol

1. Paying off debts will clean up my credit report
Your credit report is a snapshot of your credit history over a period of time. Just because you pay your bills on time for a brief period of time, that doesn’t mean you’ll have excellent credit. Creditors will look into your past as well, and any delinquencies will hurt your credit score.

2. Credit counseling adversely affects my credit score
Credit counseling should not be viewed as a negative thing. To some extent, it shows financial concern and responsibility. It shows that while you might have some financial difficulties, you’re willing to come forward to work out your credit issues. Most credit bureaus will not view this as a negative thing. If your accounts are delinquent, that’s bad. If they’re current and you’ve got a plan to pay off what you owe, that’s ok. Your FICO scores probably won’t be affected by it. However, some lenders do see and are discouraged by any references to credit counseling.

3. Limiting number of credit cards helps my credit score
The number of credit cards you have may actually help you. If you have credit cards that have been opened for a significant duration of time, this shows creditors that you have experience and history with credit; even though you may not use some of your credit cards. So don’t be so quick to cancel all your unused credit cards.

4. Too many inquiries hurts my credit score
This is another common credit myth. Of course too many inquiries looks bad. It causes concern because it presupposes you’re in need of a lot of credit; a sign of financial struggles. However, soft inquiries are actually ok and don’t affect your credit score. Hard inquires do negative affect your score, but if you have a batch of them together, let’s say over a period of 30 days, then they’re all grouped together. In most instances, batch inquiries over a short period of time indicate that you’re shopping for the same item, such as a car. You aren’t red-flagged as someone looking for multiple sources of credit.

5. Looking at my own credit report hurts my score
It’s actually encouraged for you to check on your credit report for any fraud and errors. Looking at your own credit report does not hurt your score. It’s a soft inquiry.

6. FICO scores are fixed for half a year
FICO scores are adjusted when anything is changed on your credit report. So whenever something’s added or taken away, your credit score is recalculated.

7. I don’t need to check my credit report
You should periodically check your credit report, even if you pay all your bills on time. Sometimes there are erroneous credit reporting. There’s also the possibility of credit theft and fraud. You should check for these instances and report them whenever such situations develop.

8. Credit reports are all the same
No, credit reports are not the same. There are three main credit bureaus in the U.S.: Experian, Equifax and Transunion. Each credit bureau has their particular model of reporting credit.

9. I don’t need to be concerned about my credit after a divorce
You should separate your joint credit accounts after your divorce. Contact your creditors and make sure everything’s divided appropriately.

10. My credit history will reset after seven years
This depends on the situation. For Chapter 13 bankruptcy, the debt disappears after seven years from the filing date. However, a Chapter 7 bankruptcy resets after 10 years.

11. I can have someone improve my credit
Not really. You can have credit reporting mistakes cleared up. Or you can pay whatever balances you owe. These procedures can help improve your credit. You can also have certain companies help file dispute letters on your behalf on certain credit report entries. Credit bureaus are required to verify these entries, and if they don’t the entry must come off. This works sometimes.

Summarized from Bankrate Article
http://www.bankrate.com/brm/news/debt/debtmanageguide/report-myths4.asp?caret=3d

On May 8, 2008, Sallie Mae erroneously reported delinquent payments for some of it’s student loan borrowers. As a result, one of the three reporting agencies, Equifax, proceeded to lower FICO credit scores for those handful of borrowers, even though there was nothing wrong and all payments were current. Some student loan holders reported that their FICO scores dropped as much as 100 points because of Sallie Mae’s technical mistake.

The problem originated in a technical translation error for graduated or extended repayment plans. These plans were marked as arrangements for partial payment and thus were adversely marked on FICO score reports.

Sallie Mae is working with Equifax to correct those affected borrower’s credit reports. Sallie Mae has also offered to give credit reference letters to those people who need it to rectify their credit before creditors and potential lenders. All the major credit bureaus have been notified of Sallie Mae’s reporting error.