When you make a payment on a credit card or loan, the business that gave you the loan or credit keeps a record of how much and often you pay, as well as the credit limits and loan balances. Those businesses and other sources may report your credit, loan and payment history to one or more credit reporting companies. The credit reporting companies each combine the information they receive about your different credit, loan and payment activities into a credit report. The credit reporting companies prepare credit reports for people in the U.S. Since not all businesses report to all three credit reporting companies, the information on your credit reports may vary.
A credit report is an organized list of the information related to your credit activity. Credit reports may include:
Credit reports may also include:
Under Federal law, you are entitled to receive one free copy of your credit report from each credit reporting company every 12 months. For more information visit the Consumer Financial Protection Bureau's website.
Credit scores are the result of mathematical formulas that use the information in your credit report to calculate a value which suggests how likely you are to pay your bills in the future.
The credit scores you get from different companies will not be the same. There are a number of reasons for that:
Businesses use credit scores to estimate how likely you are to pay back loans or services. People with higher credit scores may be more likely to pay back their debts. People with lower credit scores may be less likely to pay their debts.
The Consumer Financial Protection Bureau's website has additional information on credit scores.
A credit score is based on information in your credit report. Some factors include how much money you owe, how long you've owed it, how many new accounts you have, how often you miss or are late with payments, and what type of credit accounts you have. Changes in any of those factors may cause a score to go up or down.
The Consumer Financial Protection Bureau's website has additional information on factors that can affect your credit score and how you can maintain a good credit score.
For more information about how to improve your credit please visit the Consumer Financial Protection Bureau's website.
When applying for credit or financing or as a result of a collection, a "hard inquiry" will appear on your Credit Report. Below you will find the names of businesses that have reviewed your Report over the last two years. Hard inquiries stay on your Credit Report for 25 months.
Soft inquiries occur when you check your own credit report or give permission to someone like a potential employer to review your credit report. Soft inquiries may also occur when businesses, such as lenders, insurance companies, or credit card companies, check your credit to pre-approve you for offers, or when you use credit monitoring services from companies like Experian. Soft inquiries on your Credit Report are only visible to you, except: (1) insurance companies may be able to see other insurance company inquiries; and (2) inquiries by debt settlement companies you have authorized to access your report may be shared with your current creditors. These inquiries have no effect on your credit score as they are never considered as a factor in credit scoring models. Soft inquiries are not disputable.
A charge-off is an entry on your credit report that indicates a creditor, after trying and failing to get you to make good on a debt, has given up hope of getting payment and closed your account. A charge-off is considered a derogatory entry in your credit file—a serious negative event—and it can adversely affect your credit scores and your ability to borrow additional funds.
Creditors typically charge off accounts after they've been delinquent—gone without any scheduled payments—for six months. After the first month's delinquency, the account entry will move from the "Accounts in Good Standing" section of your credit report to a section titled "Negative Items" or "Negative Accounts." Its entry will indicate the outstanding balance on the account and how long it has gone unpaid in 30-day increments up to 180 days. If the creditor decides after 180 days to charge off the account, its entry and the outstanding balance will still appear on your credit report, but it will be noted as charged off.
If the creditor subsequently sells your debt to a collection agency, the balance due on the charged-off account will change to zero, but the charged-off account will remain on your credit report for seven years. At that point there's nothing you can do to remove it unless you can prove the entry is inaccurate.
Note that a charge-off does not mean your debt is forgiven. You are still legally responsible for repaying the outstanding amount. As long as the account entry is designated as a charge-off
Higher balances on credit cards also can affect your credit. Although scoring systems vary, low balances with a high amount of available credit can result in a higher overall credit score. If an identity thief steals a credit card and goes on a spending spree, this can negatively impact your credit score. The charges can go undetected for months if you don’t check your statements regularly.
“Hard inquiries” on your account also can negatively affect your credit score. A hard inquiry appears on a report any time a consumer applies for credit. It signals to lenders you may be applying for credit, which may be viewed as a negative factor in your credit score. In the case of credit card fraud, a thief may apply for credit and cause inquiries to appear on your report, which could impact your credit score.
Unfortunately, a foreclosure hurts your credit score, which means that it will be harder and sometimes impossible to get credit cards and loans in the coming years and that you can expect to pay higher interest rates. Plus, some employers look at your credit score, which means that it may make it more difficult to land a job.
Experts estimate that a foreclosure will lead to a dip in your credit score of about 200 or 300 points. So let’s say you had a near-perfect 800 credit score pre-foreclosure; after the foreclosure, you might have a credit score that was more in the 600 or lower range, which is considered bad (credit scores range from 300 to 850).
Being seriously in debt can be a seriously bad thing. You could have debt collectors harassing you unmercifully or even have a lien put on your property or seize one of your assets. For that matter, you may even be suffering physical symptoms as the result of the stress you’re feeling over your debts. Many people struggling with debt have suffered heart problems, acid reflux disease, insomnia and other health problems. Of course, if you’re having a serious problem with debt, you already know much of this firsthand.
It can be tempting
You’ve probably seen those attorneys’ ads offering to handle your bankruptcy for $500 or even less. This can be very tempting. A bankruptcy can be completed in 3 to 6 months and will relieve you of many of your unsecured debts such as credit card debts, personal lines of credit and medical bills.
Reason #1: 10 long years
As tempting as bankruptcy might seem, think long and hard before you file. There are some serious downsides to a chapter 7 bankruptcy you need to consider.
A bankruptcy will stay on your credit record for 10 years. Bankruptcy filings are public records so any prospective employer or landlord could see that you had a bankruptcy, which could cost you a job or a place to live. You would not be able to get a standard mortgage or an auto loan for the first few years after your bankruptcy nor would you be able to get an unsecured credit card – unless you were willing to pay an ungodly high interest rate.
Reason #2: Debts that can’t be discharged
Despite what you may have been led to believe, a chapter 7 bankruptcy will not discharge – or get rid of – all of your debts. For example, a bankruptcy will not discharge student loan debts, past due taxes, child support or alimony, and any debts that were incurred by fraud or malicious acts.
Reason #3: A chapter 7 bankruptcy is a liquidation bankruptcy
Is important to keep in mind that a chapter 7 bankruptcy is a liquidation bankruptcy. This means it’s basic purpose is to liquidate your assets so your creditors can be paid as much as possible.
Reason #4: You can’t keep everything
What you can and can’t keep as the result of a liquidation bankruptcy varies from state to state. However, in general, you will be able to keep up to $6000 in equity in your automobile and up to $50,000 of equity in your home. You will also be allowed to keep any tools that are required in your job and your retirement account (with certain limitations). You will be also allowed to keep personal possessions such as your furniture and clothing.
Reason #5: Losing prized possessions
If you have other possessions that have some value, your bankruptcy judge or trustee could order them to be seized and sold at auction. This might include some of your most prized possessions such as heirloom antiques, your boat or vacation home.
Where tax liens once had the power to negatively impact your credit score, this is no longer the case. Since these liens are no longer reported on consumer credit reports, their power to damage your credit score has been nullified.
You should note, however, that there are plenty of other downsides to having a tax lien in place. As the IRS warns, a lien attaches to all your assets and to any future assets you acquire while the lien is in place. The lien will also attach to business property, including accounts receivable. If you eventually file for bankruptcy, the Notice of a Federal Tax lien can also continue after your bankruptcy is complete.
In other words, a tax lien can create myriad problems in your financial life even if it’s not listed on your credit report. For that reason, you should pay your tax liabilities in full and strive to avoid liens whenever possible.
A goodwill letter is a simple way to restore your credit to good standing by requesting that a lender or servicer erase a late payment on your credit report. They can be effectively used for both federal and private loans as well as credit cards and accounts with just about any financial institution.
You typically have the best chance of success with a goodwill letters if you’ve experienced financial hardship due to unexpected circumstances. The letter allows you to take responsibility for your actions and to ask (in a very nice way) if your servicer can empathize with the situation that caused the lateness and erase it from your report,
A goodwill letter can also be helpful when you think a late payment has been recorded in error: for example, if you were in deferment or forbearance and weren’t required to make any payments during the time the late payment was recorded, or if you know you’ve never been late on a payment before.
A late payment is an amount of money a borrower sends to a lender or service provider that arrives after the date that the payment was due or after a grace period for the payment has passed.
How much a payment is late and other factors can have a negative impact on a person’s credit score and, indeed, their ability to obtain credit at a favorable rate.
Regardless of the reason, there are several consequences to making late payments, including:
Payments that are less than 30 days late often do not show up on someone’s credit report, unless they occur frequently. When they do show up, they can remain on that person’s credit report for up to seven years, after which they fall off automatically.
Occasionally, people can avoid the negative consequences of a late payment by sending a letter explaining the why the payment is late to the creditor or service provider. The key is to remain in contact. Once a delinquent account is turned over to a collection agency, the account holder can never get that account current again.
Even late payments that aren’t that severe can affect a person’s credit score. Fair Isaac Corp., the credit scoring company, says the general criteria for any impact they would have is how recent the late payments are, how severe they are and how frequently they occur.
In addition, late payments are categorized on a person’s credit report by the number of days late — 30 days, 60 days, 90 days, 120 days and 150 days, or as charged off because of their severe delinquency.
If you make child support payments as part of a divorce or other settlement, you may wonder how child supports affects your credit. The truth is, a missed payment can hurt your credit, and not paying child support for the long-term can have serious credit score implications.
Follow along to learn how it all works.
In many cases, late payments are reported to the credit bureaus. Like a missed credit card payment, the delinquency can stay on your credit report for up to seven years.
“Delinquent child support payments can be reported. If they are, the delinquent payments can have a very negative impact on credit scores,” Director of Consumer Education and Awareness at Experian Rod Griffin shared.
Your credit score is based on a formula using information found on your credit report. (Learn how to read your credit report.) Because missed child support payments can be reported on