New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

Credit reports explained

I have a copy of my credit report. What should I be looking for?
Check for late payments and credit cards you no longer use that you never closed out. Most importantly, look for any incorrect information on your credit report.

- advertisement -

If you find a mistake -- an account that isn't yours or a disputed amount -- you'll need to fill out the form that comes with the report, or follow the instructions on the explanatory sheet.

"You're guilty until proven innocent in the world of FICOs," says Michael Feldman, a co-founder of MortgageIT.com. "It's not always your fault, and even if it is, usually there's a very good explanation. Once you're in the mortgage process, you can't get it removed. You have to explain it to the bank underwriter. If you can't prove it, it results in a lower score, a higher rate, or a decline."

How can I cleanup my credit report?
The general guidelines for cleaning up your credit report, says Feldman, include paying your bills on time, limiting the amount of outstanding credit, and resolving outstanding bills.

"I see this all the time," Feldman says. " A person has a $100 doctor bill and they say, 'I'm not paying it out of principle.' I say, 'Throw your principles out the window, it's going to cost you thousands on your mortgage.' "

Limiting the amount of outstanding credit is important even if you've never been charged a late fee, says Victor Benoun, a mortgage broker and author of the book, Your Castle, No Hassle.

"We think if we pay all our bills we should have perfect credit," he says. "That's not always the case. Say you have 10 credit cards and they all have credit of $5,000," he says. "If you have the maximum on all of them, even if you pay them all perfectly, you'll have a lower score than someone with lower balances or fewer cards."

That's not always easy, Benoun admits, in a market in which consumers are encouraged to use credit for even things such as gas and groceries. If you're shopping for a mortgage, though, how you handle your money makes a real difference in the kind of loan package you can qualify for.

Once a judgment has been paid, will it be automatically removed from a credit report?
Heck, no. According to Don Taylor, one of Bankrate.com's financial experts, "The judgment will remain on your credit report for seven years from the filing date."

He says that according to Experian's Web site, "Federal law specifies how long negative information may remain on your credit report. To prevent past errors from haunting you forever, most negative information must be erased after seven years. This includes late payments, accounts that the credit grantor turned over to a collection agency and judgments filed against you in court -- even if you later paid the account in full."

Is it possible to insert an explanation to a credit report?
There are two types of comments you can put on your credit report, according to Don Taylor, a Bankrate.com financial expert. One is an explanatory paragraph that tells prospective lenders and employers about why you had trouble managing your credit in the past. Lenders are more influenced by your current payment history than they are by your reasons for past difficulties. The statement will stay on your credit report for seven years unless you write in to request that the statement be removed from your credit report.

The second type of consumer comment is a statement of dispute. If the creditor and the consumer can't agree on the consumer's account status, the consumer's statement of dispute and the creditor's statement of the account status will both show up on the credit report. This type of statement is an important consumer right protected by the Fair Credit Reporting Act.

 

 

 
-- Posted: Sept. 11, 2003
   

 

 
 

 

Looking for more stories like this? We'll send them directly to you!
Bankrate.com's corrections policy
Print   E-mail

Credit Cards
Compare weekly rates
WEEKLY AVERAGES
Type Fixed Variable
Standard 13.23% 14.86%
Gold
Platinum 12.70% 16.01%
All 13.02% 15.70%



RELATED CALCULATORS
  Loan calculator (includes amortization schedule)  
  See your FICO score range -- free  
  What will it take to pay off your credit card?  
VIEW ALL 

BASICS SERIES
Credit Card Basics
Don't get trapped by card debt. Learn to use it wisely.
How to find the best card
Check your credit report
Finance charges explained
How to ask for a lower rate
Improve credit with a card
How to repair your credit

MORE ON BANKRATE
Banking glossary  
News archive  
Keep an eye on the leading rates  
Find a high-yielding CD


- advertisement -

 
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.