Credit Report Entries – The Good and the Bad
As time goes on, consumers are becoming more and more aware of the importance of both their credit rating and their credit score. These two pieces of information are vital tools for lenders, who use them to decide whether or not to grant a loan or credit to a consumer. Higher credit ratings and reports with positive entries have a tendency to lead to credit; low scores and negative entries are likely to lead to declined applications. While consumers may understand the importance of credit reports, they may not understand what types of entries appear on the document or how long they stay there.
While the FICO score offers a speedy summary of a potential client’s financial health, it is the report that provides all of the details that lenders desire to see. Previous debts, installment loans and mortgages are listed there, together with bankruptcies, tax liens and more. If you have a bank card, it is listed. If you had a car loan that you paid off five years ago, it’s listed, and the report will note whether you paid in a timely manner and fully.
Positive entries on your report will include paid debts, open credit accounts in good standing and closed accounts. Contrary to popular belief, positive entries don’t appear on your credit report indefinitely. Open accounts stay on your report for as long as you have them, with extra entries if you make late payments. Closed accounts stay on your report for a maximum of 10 years. After that, they are removed from the report.
Negative entries on your report will consist of things like unpaid tax liens, bankruptcies, and unpaid installment loans or charge card debt. These are “red flags” that have a tendency to catch the attention of lenders rather quickly. If you have quite a few negative entries and a so-so credit score, you may find it difficult to obtain extra credit. On the positive side, negative entries disappear from your credit rating after seven years, with the exception of Chapter 13 bankruptcy filings, which stay for a full ten years.
The key to a healthy credit report is often paying your bills the whole amount and on time. Prompt payment of your bills when they are due will also help you maintain a healthy credit score. If you have negative entries, they will fade away in time, but good entries from open bank card accounts can stay indefinitely. For that reason, you should do your ideal to pay your bills promptly in order to keep your credit profile in tip-top shape.
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