Understand Your Credit Report

Many people have the difficulties to understand their credit reports and realize the impact the certain decisions will have on their credit. This section explains six importance words of your credit, which are inquiries, late payments, charge offs, repossession. Better understanding of these words may increase your credit score.

Inquiries

Inquiries are caused by companies looking at your credit report for the possibility of issuing your credit facility. It could be from a credit card, Hire purchase, mortgage,or a personal loan. A credit issuing company is very sekptical of someone who has more than 6 enquiries within 3 months because they don't know if you were accepted for or not. They may think you could be desperate for money as you went to many places for the possibility of credit facility. Too many inquiries in a short time does hurt your credit score very badly.

But they usually fall off within 6-12 months and do not have negative impact on your credit.

Late Payments

Late payments tell the credit agency that you weren't able to pay your bills on time. The agency may treat you as a higher risk customer that will cause your credit score down and cost you more on your future loans. The later you are , the more it damages your credit. Late payments normally stay on your credit report for 7 years from last date reported.

Charge Offs

When you haven't paid your bill for a long time, the company decideds to take this prospective income written off from the books. It treats these late payment as a loss to the bad debts. Then the company will create a new bad mark on your credit. The mark will stay on your credit for 7 years. Therefore, if you have trouble paying bills, consider looking into a debt settlement program or a debt consolidation loan.

Repossession

If you don't pay the bill on your car loan, the bank is going to take your car away and recoup some money from it. For example, you borrow $40000 from bank to purchase a new car. After 6 months, you can't afford $600 monthly payment. The bank took the car from you and sold it for $20000. There is a $20000 deficiency between the amount you owed and the amount the car is sold for. You are still reponsible for the $20000 shortfall. The bank will create a bad mark on your credit report until you pay it back. Repossessions can happen with other items as well, such as furniture, appliances, sports equiptment and business equiptment.

If you are experiencing finanical difficulties, try to sell car or these items by yourself. Banks often sell them for much less than you could sell them for.

Judgement

It is the result of you losing a case in court. A creditor goes to court to get a judgement against you for the amount of the debt you owe. If the creditor decides to enforce the judgement, the next step is to file for Discovery of your assets. The judge can order that your assets are to be sold to pay the judgement. Having a judgement on your credit report will lower your credit considerably. If you can avoid it by paying your bills on time, do it. If not, make arrangement with the creditors as soon as possible.

Bankruptcy

It is the last resort to solve your debts matter. If you can't see any way out of the debts, bankruptcy is a way to wipe all your debts and start as fresh.




Return to the top of Understand Your Credit Report