How Credit Reports Work

Click on
the questions below for more information.
What is a credit
What kind of
information is on my credit report?
Who looks at my
credit report?
How long will
negative items stay on my Credit Report?
How can I see my
Credit Report in order to repair it?
How much bad credit
does it take for me to be denied credit?
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

Just like when you were in grade
school, your credit report is your financial report card to
the world.

Back to top
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.


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.

Back to top
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.
Back to top
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
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
Back to top
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.
Back to top
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 shouldn¹t 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. Click Here to Learn About Credit Repair.

Back to top

Comments are closed.