Credit Lies and Urban Legends

We'd like to take a moment to tackle a few credit reporting misconceptions and rumors that just won't die. This is what we call a "lightning round" Q&A, designed to quickly disperse the crowd whispering around the water cooler. If you're looking for deeper, more meaningful insights into the credit reporting industry, you won't find it here. (It's here.)

MYTH: Cutting up a credit card closes the account.

FACT: Piece those shards back together, and get your lender's phone number from the back of the card. To cancel an account, you've got to call the credit card company and tell them so. (No, burning the bills in effigy doesn't count, either.)

MYTH: Closing an account removes it from your record.

FACT: Sorry, nope again. The credit reporting industry has a long and somewhat unforgiving memory. Like that high school yearbook photo, some blasts from the past won't expire soon enough. (Get your calendars out if you've got a few unseemly entries, and count the days until you're free from the reminders.) (Tip: If you want to get your mother to stop sharing photographic evidence with visitors, you'll have to start calling more often.)

MYTH: Even good information drops off your report after seven years.

FACT: Unlike the pessimists among us, credit bureaus prefer to remember the good times longer than the bad. If you have an account that was in good standing but is now closed, it could appear on your record indefinitely reflecting kindly on days of yore.

MYTH: Paying off an old delinquent account will damage your credit score.

FACT: File this under the "strange but true" tab: Sometimes paying off an old debt "re-ages" an account, starting the seven-year clock a-tickin' again. However, this is rare, and usually only happens if you start using a charged-off account again and make new late payments. (Have you not learned from your past sins?) So don't use this as an excuse to let an old debt slide. If you want to right your karma, pay off a delinquent account and rest assured that it will drop off your report seven to 10 years from your last boo-boo (e.g. late payment) or from the time the lender tattles on you. Potential lenders will then see on your report that you did the right thing by righting a past wrong.

MYTH: Paying off an account instantly boosts (or lowers) your credit score.

FACT: Would that bureaucracy worked so quickly. But in fact your good deeds (and bad ones) may take a while to make a significant mark. Unless that one account is the single entry on your report, it's unlikely that it will have a make-or-break effect on your score. Lenders tend to look on pages 2, 3, and 4 of your file to judge you. (What happened to good old-fashioned rubber-stamping, anyway?) The good news is that your more recent grown-up behavior (like paying your bills on time) matters more than those youthful spending indiscretions. The sooner you start being a Goody Two-shoes, the better.

MYTH: You've got to use an account at least once a year for it to appear on your credit report.

FACT: Some lenders may make you swipe your card at regular intervals to count you as an active customer. (And less-scrupulous ones may even make you pay an inactivity fee. Cretins.) But as long as the account is open, it will continue to be reported to the credit reporting bureaus.

MYTH: Car dealers need to run your credit before you take a test drive.

FACT: Feel free to cross your arms, purse your lips, and tap your foot around any salesman that tries to pull this one. (However, if you want to leave your firstborn -- the one who's acting up -- as collateral, be my guest.) It's illegal for a car shop to check your credit report without first getting explicit permission from you. The reason they want you to acquiesce? They're eager to line up some financing (where the real money's at).

MYTH: If you are married and one of you is applying for a loan, they need to run both of your credit records.

FACT: Unless you are applying for a joint loan (with both of your given names -- no matter how embarrassing -- to appear on the paperwork), there's no reason for a lender to run your score.

MYTH: When you get married you and your spouse's credit reports merge.

FACT: We know you two lovebirds share that sixth sense of knowing bliss with one another. However, your lender isn't buying in. Credit records are based on social security numbers. So what's his is his and what's hers is hers -- and that's how it's reported. And there's no third printout required for joint loans. The status of the account appears on both of your separate reports.

MYTH: Your hair and fingernails continue to grow after you die. A penny placed on train tracks will cause a train to derail. "Pop Rocks" can kill.

FACT: Nope. Not a chance. False. clears up some other common credit misconceptions. To unearth any untruths in your credit file, see what the three major bureaus are saying about you. For the truth behind all other urban legends, head to

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