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How
Credit Reports Work
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on the questions below for more information.
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About Credit Repair |
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| What
is a credit report?
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 either Experian,
Trans Union, 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 and they 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, then sell it to other 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 typically
reject your application.
Just
like when you were in grade school, your credit report
is your financial report card to the world.
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| 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.
Court
Records
Court records include bankruptcies, judgments, liens,
divorce, 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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| Who
looks at my credit report?
With
the passing of each year, your credit report is used
more and more often as a yard stick 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.
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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
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.
Under
the new Fair Credit Reporting Act, no collection or
charge off may remain on the credit report for more
than seven and one half years from the first late
payment that initiated the collection or charge off
status.
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| How
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
or you may buy it on line through a variety of services.
If
you order your credit report from the credit bureaus
themselves, you may find that you cannot read it because
the information is listed in an unfamiliar code. Trans
Union and Equifax credit reports are very difficult
to interpret and understand. Experian credit reports,
however, are relatively easy for most people to read.
The Qspace report is one of the most easy to read.
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| 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.
Different
kinds of creditors respond differently to bad credit.
It is safe to say that your bankruptcy will continue
to make it more difficult to get credit for seven
years after your last late payment assuming you don't
repair your credit.
Within
two years after the last negative listing, a consumer
can usually acquire "sub-A" financing for
a home (assuming all accounts are paid.) Within three
years, the consumer should be able to get normal,
"A," mortgage rates even without credit
repair (that assumes that the person has been current
on bills all the while.)
Auto
financing is a little less forgiving. You may find
yourself paying higher or slightly higher interest
rates on cars until seven years after the negative
listings (without credit repair), when the listings
are deleted from the credit report. You can get auto
financing with bad credit in most areas, but the rates
are going to be astronomical. Yet, time heals all
wounds, and you should be doing better within three
years of the negative listing.
Credit
cards and banks are the least forgiving of all. Many
standard rate credit cards will not even consider
an application from a person with a any negative credit
on their credit report. In these days, though, there
are credit cards that cater to every credit situation;
even someone who discharged their bankruptcy the day
before applying. Most of these cards charge very high
interest or unusual up front fees or security deposits.
It is common for one of these cards to charge you
an "application" fee equal to the limit
on the card. After the bankrupcty ages, prospects
become better, but they will remain sub-standard until
the negative listins fall off the credit report. With
that said, it shouldnąt be forgotten that bad credit
can usually be repaired (after a significant amount
of effort and follow-through.) Even bankruptcy can
be repaired after enough effort and time are dedicated
to the task.Learn
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