When it comes to credit, there are many supposed secrets. Credit secrets are not truly secrets as they are available for all to learn but very few take the time to learn them and even fewer seem to care until they get bad news about their application for financing. So here are three credit secrets that everyone should be aware of.
Secret # 1 – Credit reporting agencies do not care about consumers.
Truthfully, it's not really their job to care about consumers. They are private businesses and they cater to their target markets who are credit report resellers and most specifically, creditors. These creditors pay a fee, usually to a credit reseller, to obtain a credit report of a consumer who is seeking credit. Only recently have the major credit agencies started to collect fees directly from consumers by offering credit reports online combined with other products like credit monitoring or some sort of fraud monitoring product. These fees are a mere drop in the bucket compared to the money received through creditors seeking data on consumers.
Secret # 2 – Credit reporting agencies will sell your information unless you forbid them from doing so.
While it's true that the law does not allow them to distribute your entire credit profile or social security number, they can sell most everything else. The agencies compile large lists based off of certain criteria and then sell those lists to creditors or businesses who want to target those consumers. For instance: Banks who are looking to target consumers with 680-750 credit scores and currently have mortgages that have not been refinanced in 3 years or more. A list can be generated and sold so that the banks can target those consumers. This explains the glut of pre-approval notices we all receive in the mail each day. Consumers are not left without some power however; Simply write a letter to the credit agencies to opt out of this type of distribution. You'll be thankful you did and safer from identity thieves.
Secret # 3 – Paying off old debt can actually harm your credit scores.
Many consumers have an old debt that was left unpaid and now wish to make good on that debt. This is, after all, the right thing to do. But it's possible the consumer will be punished with a lower credit score because the older a derogatory item is on a consumers credit report, the less impact it has on that consumer's credit score. When the consumer pays that debt after several years, it could update the date of last activity on the report and make that old derogatory look fresh and new again. If consumers have older debts that they wish to pay I recommend consulting with a professional for advice before paying anything off. There are ways to make good on those obligations without paying such a big price.