What is a credit report?
Whenever you apply for loans, credit cards, or any type of credit or financing, a lender will likely pull your credit report from one or more of the three major credit bureaus: Experience, TransUnion, or Equifax. Lenders will use the information in your credit reports to determine your credit worthiness. Decisions such as how much money they are willing to lend if any at all, and at what interest rate are largely based on the data contained in your credit reports.
The personal information in your credit reports is provided to the credit bureaus by the same lenders who grant you credit. If you are late making a payment, have an account sent to collections, or even if you merely apply for more credit, at least one of the three major credit bureaus is notified and an entry may be quickly added to your credit report. What's more, this information can remain on your credit reports for a number of years. As such, 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 credit information and manage your credit reports in order to generate profits. Many people have the misconception that the credit bureaus are government entities. The truth is that every credit bureau is a for-profit company that makes money by selling your information to credit grantors who wish to see your credit history before they decide to lend you money.
Your credit reports are used to judge your character, but in many cases, errors in your credit reports mean that lenders, employers, and others are getting the wrong impression of who you really are. The reason the credit bureaus are able to charge for this service is because lenders have determined that the best and most efficient way for them to determine credit risk is by looking at your credit history. To them, it is worth the money the credit bureaus charge to find out if a prospective client has a history of making late payments, has defaulted on loans, or has declared bankruptcy. They would much rather pay the credit bureaus for information that helps them identify problem clients than extend credit to someone who does not pay back the debt.
The problem with this system for you, however, is that lenders may be making this decisions based on credit reports that are not accurate. Studies have shown that the majority of credit reports contain errors and many of these errors are significant enough to result in a denial of credit. Because of this, it is imperative that you know what information your credit reports contain and take steps to correct any information that is unfairly lowering your credit score.
If you don't know what is on your credit reports, how will you know if there are errors that need to be corrected? You are entitled to a free annual copy of your credit reports from each of the three major credit bureaus. You can request your free credit reports by visiting the site www.annualcreditreport.com. In addition, you are also allowed, by law, to obtain your credit report from any of the credit bureaus for free if you've been denied credit. Finally, there are a number of outlets for purchasing a copy of your credit reports or receiving free reports in exchange for signing up for a credit monitoring service.
How long do negative items stay listed?
The Fair Credit Reporting Act (FCRA) requires the credit bureaus to automatically delete most negative credit items from your credit reports after 7 years. Bankruptcies are an exception and can remain on your credit reports for up to ten There is no minimum time limit for reporting bad credit. Negative credit entries can legally be removed at any time. years. In addition, inquiries that are added to your credit reports when you apply for credit, may remain on your reports for up to two years.
These time limits have been created to protect you from having long past problems with your finances from affecting your current ability to get credit. The limits are, however, merely limits. There is no law that states how long a negative items must remain on your credit reports. Credit repair is possible because your creditors or the credit bureaus can choose to have the negative credit information deleted whenever they please.
How much bad credit does it take to be denied credit?
The simple answer is that a single negative listing on your credit reports may result in denial of credit - even when there are other positive credit accounts on your credit reports. A single late payment on your credit reports could significantly lower your credit score even if you have a history of timely payments on your other accounts.
Who looks at my credit report?
Lenders, landlords, employers, and insurance providers may all take a look at your credit reports. Your credit reports have become more than just a tool to check up on your finances. Today, your credit reports serve as a quick way to make judgments about your character. When you are looking for a new job, employers will look at your credit reports and make decisions about your trustworthiness and dependability. An insurance company may look at your credit reports to see how cautious you have been with your finances and use this information to make inferences about what sort of a risk taker you are in other areas of your life.
Your credit reports have become much more than a tool for lenders. They have become a barometer for gauging your character on the whole. In the future, it is possible that your credit reports will be used by a wide variety of people and organizations looking to perform a quick and objective analysis of who you are. More than ever, a bad credit score is becoming a Scarlet Letter in our credit driven society.
Is cleaning your credit report possible? Yes it is.
How much is your bad credit costing you?
6 Reasons to sign up with Lexington's Credit Report Repair Service
