Your Credit Reports

Personal Information. Names, present and past address, social security number, birth date, employer, and 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 numbers of inquiries are few over the last two years, then there may be no negative effect on your creditworthiness. However, if there are many recent inquiries showing on your credit report, credit grantors may become nervous and deny you credit.

There is a lot of false information about credit and credit reports and what does and does not lead to the necessity of credit repair and restoration.

Here are some common myths and misconceptions:

$$$$$ Paying cash for everything will help your credit rating. Using cash for all your transactions does not have an effect on your credit (other than you are not using loans, lines of credit or credit cards.)

$$$$$ Paying off collections, tax liens and late payments will remove them from your credit report. Resolving these items is no guarantee that they will be removed from your report. You must continue to monitor the situation until the items are truly removed.

$$$$$ All of your credit reports and credit scores will be the same. It’s not unusual for reports to differ from credit bureau to bureau. Plus, major banks and creditors often have their own method of determining your credit score.

$$$$$ Making a lot of money will improve your credit report and scores. Income is not used for calculating your credit score. More important is how you spend your money in terms of using credit to do so.

$$$$$ Divorce will absolve you of your credit responsibilities. The effect on your credit depends on your divorce decree, settlement and your history of sharing credit accounts with your spouse. The Equal Credit Opportunity Act states that married couples have the right to request separate credit reports and histories, even for joint accounts. And, if an account is listed under only one spouse’s name, the other spouse has the right to rely on that credit history.

$$$$$ Closing credit card accounts will improve your credit scores. This is not recommended because part of your credit score is the length of credit history in your file. Closing a credit card account with a long, positive history will normally result in a decline in your credit score.

$$$$$ The proper and responsible use of check (debit) cards can help your credit reports and scores. Most check (debit) cards do not get reported to the credit bureaus and therefore would have no impact on your credit status. Secured credit cards, on the other hand, are just like debit cards except that they do get reported to credit bureaus. That is why establishing at least three (but no more than five) secured cards is a terrific way to improve your credit score. The credit score model gives greater weight to secured cards with credit limits greater than $1,000.

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. There is no legal requirement to report any information to the credit bureaus unless they choose to do so. Inquiries may remain on the credit report for up to two years.

Most credit grantors are not allowed by the credit reporting agencies to show you your own credit report. You can purchase your credit report from the credit reporting agencies 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. TransUnion and Equifax credit reports are very difficult to interpret and understand. Experian credit reports, on the other hand, are relatively easy for most people to read.

With the passing of each year, your credit report is used more and more often as a yardstick to measure your creditworthiness. 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 but in most cases, they cannot legally do so without your permission. If you rent, you may have already been through a credit check to determine your worthiness as a renter. Unfortunately, your permission is not required when inquiries are made as part of a pre-approved credit offer.

“R” refers to a revolving account, “I” refers to an individual account, and “M” refers to a mortgage account. The creditor supplies this rating. It is their rating of you as a borrower. There are only two ratings that are not negative. A rating of “1″ is good and a rating of “0″ means that they don’t have enough history with you to rate you. Every other rating, “2″ through “9″ is negative. In our experience, creditors don’t look at these ratings when you apply for financing. The creditor usually looks at the late pays or other notations such as “charge off” or “collections.” However, any rating BUT a “1″ or “0″ indicates that you have problems with the account.

When you become very delinquent on an account, the creditor will probably charge it off. This means that they have written the debt off as a loss for tax purposes. This does not mean that they have given up collecting on the debt. The creditor is now likely to either sell the debt or send it to collections.