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Nothing drives me crazier than reading erroneous credit advice or education online from so called credit experts. The field in which I operate is not only highly technical but also has a direct impact on the financial bottom lines of the consumers who read, believe and the attempt to deploy educational credit content. It’s too often that people who have a basic understand of the industry attempt to confer the title of “expert” upon themselves and then run off and start giving advice, which in many cases is incorrect. The purpose of this blog isn’t to “out” any person or company in particular but to simply warn people that they need to do their own due diligence before they believe advice they read or hear.
Here are some examples of grossly incorrect advice and information that I’ve found on the web over the past few months. All of these were framed as education or advice and, unfortunately, are all horribly incorrect.
#1 – Bankruptcy stays on a credit file for 7 years. This is low hanging fruit. Even a pretend credit expert needs to get this one correct. Bankruptcies stay on your credit report for 10 years, not 7 years. In all fairness to the source of this error…they acknowledged that it was mistaken.
#2 – Inquiries are worth 5-12 points each. The source of this error claims that FICO told her this little factoid about inquiries. I too went to FICO to see exactly what was said and the source of this error is misinterpreting what she was told and seemed to be more interested in shocking the world with the revelation about inquiry value than actually getting it correct, which is inexcusable. Of course, inquiries have no individual value. In fact, NOTHING on a credit report has individual value. No one thing is worth “X” points in your score.
#3 – Items in an active dispute can hurt your credit. No, no, no. This is incorrect and the source of this errors suggests that he confirmed it with Experian. When an item is in an active dispute it is coded with the “XB” compliance condition code by the bureaus or the data furnisher. As long as “XB” is appended to the offensive credit entry it cannot have any negative impact to your score.
#4 – Cash flow is the 3rd most important factor in your credit score. The source of the information insists that this is correct and I’m too tired to argue with him any longer. Cash flow has no impact on your scores, zero, nada. Cash flow isn’t on a credit report so it’s impossible for it to have any influence on your credit scores. The source of this error is also the source of errors 1 and 3.
#5 – Credit scores are used by employers. There are too many sources of this little gem to name all of them. I constantly find myself cleaning up articles and even some media appearances. The issue, of course, is that credit reports can be used by employers but credit scores are not delivered with those reports. The term is used as if they were the same things…credit reports/credit scores…of course they are not the same thing. Here’s a great video put together by a guy named Greg Fisher. It’s a collage of media and credit industry employees all making the same mistake about credit scores and employment.
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Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. You can follow John on Twitter here.