Whenever you apply for any type of credit or financing, a credit report is pulled from at least one of the three major credit bureaus. While there are hundreds of smaller credit bureaus around the country, virtually every credit bureau is affiliated with Trans Union, Experian, or Equifax. These credit bureaus collect and maintain information on the vast majority of Americans, but they are not affiliated with the government in any way. The credit bureaus are for-profit corporations that sell your personal information for money.
The credit bureaus receive your personal information through the same lenders who grant you credit. They have agreements with each of these credit grantors that require the credit grantor to inform the credit bureaus of everything that occurs in your relationship with the credit grantor. If you make a payment late, the negative credit listing is quickly reported to at least one of the three major credit bureaus and is added to your credit history.
Credit reports are not just a record of how you are currently managing your credit accounts. Credit reports are histories of everything you are doing with your credit now, and everything you have done in the past. The credit bureaus collect this information, list it on your credit report, and then sell it to credit grantors who wish to see your credit history before they decide to lend you money. The credit grantors who review your credit are especially interested in any negative credit. If you have shown any tendency to pay late, or to disregard your financial commitments in the past, then the creditors' computers will immediately reject your application. Just like when you were in grade school, your credit report is your financial report card to the world. Learn More.
What Kind of Information Appears on the Credit Report?
Merchant Trade Lines These include all regular credit lines such as department store cards, auto loans, mortgages, and credit cards. If there is any history of late payment, or if the trade line was included in bankruptcy, charged off, or put into repossession, the listing will be considered negative by all credit grantors.
Collection Accounts When an account is referred to collections because of delinquency or because of a bad check, this appears on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts. Any type of collection account, whether paid or not, is considered very negative by all credit grantors.
Public Records Public records include bankruptcies, judgments, liens, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered negative by all credit grantors.
Inquiries Every time a potential credit grantor looks at your credit file, a credit inquiry appears on at least one of your credit bureau reports. If the number of inquiries is very few over the last two years, then there may be no negative effect on your credit worthiness. However, if there are many recent inquiries showing on your credit report, credit grantors may become nervous and deny you credit.
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How Long Will Negative Information Stay on My Credit Report?
The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for a Chapter 7 bankruptcy which can be reported for up to ten years. These are the time limits for reporting negative credit. The creditor or the credit bureau can choose to have the negative credit information deleted whenever they please. Inquiries may remain on the credit report for up to two years. Lexington Law is a professional credit repair company that can help you with this.
Can I See My Credit Report?
Most credit grantors are not allowed by the credit bureaus to show you your own credit report. But you can purchase your credit report from the credit bureau for a fee. Once you receive your credit report, you may find that you cannot read it because the information is listed in an unfamiliar code. Trans Union and Equifax credit reports are particularly difficult to interpret and understand. Experian credit reports, however, are relatively easy for most people to read. Your best bet would be to order a 3-in-1 combined bureau report since they are the easiest to read. To order one, visit www.creditrepair.com.
How Much Bad Credit Does it Take for Me to be Denied Credit?
As you may have already experienced, even one small late pay listing may result in credit denials. It is a myth that a large amount of positive credit can outweigh some negative credit. Any negative credit whatsoever can become a substantial credit obstacle. Learn More.
Who Looks at My Credit Report?
With the passing of each year, your credit report is used more and more often as a yardstick to measure your character. Prospective creditors will always review at least one of your credit reports before granting you credit. Today it is increasingly common for insurance companies to review your credit before extending auto or health insurance. Many employers now check credit before they consider you for a position. If you rent, you may have already been through a credit check to determine your worthiness as a renter. Learn More.
New Goal for Your New Life Together: Becoming Credit-Wise
Many people planning to be married take time to reexamine
financial priorities, set a new budget, and establish savings or
debt reduction goals. Being credit-wise consumers means
realizing that managing your credit requires similar planning
and care-and doubly so when you are entering into marriage.
Think about your special personal and financial goals for the
coming year. Are you planning a major purchase or a trip abroad?
Are you working to establish financial stability and security?
Since good credit takes time to build, planning for your future
together should include checking your credit report. This is a
great time for each of you to request a copy of your credit
reports and look them over--not simply for inaccuracies, but for
ways you might improve your overall credit status.
Many of life's major changes, such as marriage, can impact your
credit, but keeping these credit-savvy tips in mind can help you
keep and build your credit together, so it's always available
when you need it.
Your Marriage and Future
Getting married brings many financial opportunities to couples
who can combine their resources. As you plan your wedding day,
plan for your future too and take these steps to keep your
credit in tip-top shape.
Notify creditors and credit bureaus if you change your name.
When you change your name at marriage--or any other time--it's
important that you make sure your creditors and the credit
bureaus are notified of the change. Otherwise, you might lose
your credit history.
Keep credit in your own name in addition to joint accounts.
Women especially must take care to keep some credit in their own
name. (e.g. "Jane Smith" rather than "Mrs. James
Smith"). Every year women who have never paid a bill late
are denied credit because they have no credit history in their
own name.
If either you or your spouse-to-be has had trouble getting
credit alone, try setting up a joint account to capitalize on
your shared income and/or one person's stronger history. As your
joint account history grows, you should each acquire and
maintain an account of your own as well, to establish your
credit on an individual basis. As you establish individual
accounts, you might close some extra joint accounts, keeping
only those you actually use.
If you anticipate making a large purchase with one of your
credit cards, you might want to request a credit line increase
now, so you know the credit is available when you're ready to
buy.
Building Good Credit Together
When you apply for credit, the lender will undoubtedly check
your credit report. The information in your credit history helps
lenders decide how much credit and what interest rate you are
eligible for. The better your credit history, the more likely
you are to qualify for the best credit deals, including rates on
a mortgage. But what will creditors be looking for?
Pay Your Bills on Time
Creditors always look for indications that the prospective
borrower is a good credit risk: a person who will pay back his
or her debts in a timely fashion. Obviously, a history of
on-time payments demonstrates that you are just such a person.
But that doesn't mean your credit history must be perfect for
you to qualify--few people's are, after all. "Good"
credit can include a few minor dings in your report, such as up
to two credit card payments 30 days late or one installment
payment, such as an auto or student loan payment, 30 days late.
No payments of any kind should be more than 60 days late and
there should be no outstanding public record debts such as
judgments or liens.
Keep Your Debt Load Reasonable
One factor any creditor must assess before offering credit is
the total debt of the person applying. If a large portion of
your income each month is already committed to paying off other
debt, the lender will wonder if you may have trouble paying back
an additional loan. As a rule of thumb, financial experts say
that non-mortgage debt payments should not exceed 10-15% of your
take home pay each month. If your debts are currently too high,
consider ways to pay some down before you apply for new credit.
Avoid Unnecessary Inquiries
Whenever you authorize a creditor, employer, or other
business to check your credit report, an "inquiry" is
added to the report itself--a note that someone has checked your
credit. An inquiry usually stays on your credit report for two
years. A lender considering you for a loan will look at the
number of inquiries recorded there and when they took place. A
large number of inquiries occurring in a short period of time
may be interpreted as a sign that you are either applying for
lots of credit because of financial difficulty or overextending
yourself by taking on more debt than you can actually repay.
(Checking your own credit report, however, does not impact your
credit rating.) Therefore, it's always a good idea to minimize
inquiries into your credit report. If you're shopping around for
mortgages, for example, don't let every lender you consider run
a credit check. You might have to settle for slightly more
approximate estimates on what the lenders can offer you, since
they can't verify your credit history. But that's still better
than doing all that shopping around only to find that the lender
of your choice now perceives you as a less solid credit risk and
wants to charge a higher rate.
Eliminate Excess Unused Credit
Just as a high number of inquiries suggests you may be
overextending yourself, a lot of available credit means you have
the capability to overextend yourself in the future, even if you
have not done so in the past. Although people may perceive
having several credit cards with high limits a sign that they
have good credit, too much of this good thing can make them seem
like a poorer credit risk. The lender needs to be reasonably
sure that you will continue to be able to repay your debt in the
future. But if you have thousands of dollars of unused credit
available, you might spend it all the month after your loan goes
through and suddenly have more debt than you can pay off. To
prevent this concern from arising, you should close unused
credit accounts before applying for a large loan, and/or
consider having your credit limits reduced. If you do either of
these things, make sure to ask the creditors to record that the
account was closed or changed at the consumer's request--you
don't want anyone to get the impression the bank closed the
account because of problems with your payment habits.
Of course, as with most worthwhile plans, building good credit
together requires a long-term commitment. So set your
credit-wise plans for your new life together in motion now and
stick with them. By doing so, you may reap the benefits of that
commitment for a long time to come. Click Here.
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