How Important Is It That You Understand Your Credit Report?
Author: Donald Saunders
Category: Finance
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You doubtless know all too well that the information which is contained in your credit report is used by the finance and credit card companies when considering whether or not to extend credit to you, but do you know just what is actually in your credit report? For example, did you know that the details contained in your personal credit report could influence whether or not you are able to buy a new home or will need to continue to live in your current 'shoebox'?
In many cases people think that if a lender looks at your personal credit report that company is just looking at your credit score and, although this is definitiely one thing that they do look at, they are looking at much more. In particular, they are looking to see the amount of debt you have compared to your income and even quite small accounts, such as those with a mail order catalogue company, will be considered as a deduction from your income when considering a loan request.
If a lender comes to the conclusion that you have got more money going out than you have coming in then your loan request will automatically be turned down. Indeed, by law a specified percentage of your income has to be available to meet the payments on a loan before the lender can approve it, whatever the reason for the loan.
A lender will also be looking at your credit history for the past seven years to see how you have managed any loans during that period. In particular, they are looking to see if you have made payments on time and will take note of any payments that were more than thirty days late. It might not have seemed especially important to you when you got into difficulty and were late making payments for several months on one of your accounts, but any lender will certainly take this into account when assessing the risk of lending to you now.
A lender will also see whether any of your accounts have run into debt over the past seven years and whether or not these debts have now been paid. If you have outstanding payments on a current agreement lenders will be very wary about giving you further credit before these are cleared.
Finally, your credit report will also show whether you have filed for personal bankruptcy, usually within the past ten years. Some people think that a company is more likely to advance you credit if you have filed for bankruptcy because they enjoy the protection of knowing that you may not file again for several years. However, this is not the case and filing for personal bankruptcy is seen by lenders as a red flag indicating that you have already demonstrated a tendency for getting yourself in over your head when managing your money.
Your credit report is an important document which you should not only understand but that you should review occasionally for your own protection. Happily, the law states that you must be provided with a copy of your credit report once every year if you request it.
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Keywords: credit report, credit score, credit bureau, credit reference agency, obtaining credit, credit, lending
View Count: 25
Date Submitted: 9/25/2008
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