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Understanding Your Credit



What exactly is a credit report?

A credit report is a summary of your financial history. Every time you apply for credit and/or financing (i.e. buying a house, buying a car, opening a credit card, renting an apartment, etc.) the creditor pulls a copy of your credit report from a credit bureau. Virtually all credit bureaus are directly affiliated with one of the three major credit bureaus, Experian, Equifax, and Trans Union.

Despite the fact that these credit bureaus collect and maintain personal financial date on nearly every American, these bureaus are in no way related with the United States Government. In fact, these bureaus are simply private, for profit companies whose sole motivation is to make a profit by selling your personal financial information in the form of a credit report.

The customers of the credit bureaus who buy the credit reports, the same lenders that you rely on to grant you credit, have established relationships with the bureaus to continue to provide information about your credit with them. The bureaus then take this information about you from all of the lenders and put it in a database that they market and sell to other lenders in the form of a credit report. Thus, if you make a late payment, your lender quickly reports it to at least one of the three major credit bureaus and it almost instantly shows up negatively on your credit report creating a harmful effect to you. In fact, it gets even worse. Your credit report is not limited to your current financial condition, but actually contains the personal financial records of everything you have done over the past several years. For example, if you made a late payment even 5 years ago, but have paid every other bill since then on time, it does not matter because that one late payment will continue to show up on your credit report seriously damaging your credit score.

Armed with all of your personal financial information, credit bureaus then sell this information to credit grantors, who interpret your credit report to determine whether you are a good financial risk. The key to good credit status is keeping the negative items that appear on your credit report to a minimum so that credit grantors are more inclined to extend you credit at the best available rates.

The bottom line is that in the field of credit, the so called permanent record that it so often mentioned can in fact be true. Your credit report is a record of your financial past, for good or bad. With regards to the permanent nature of this record, that is entirely up to you. If you chose to do nothing about your credit report than it is in fact a permanent record. If you chose to have the eCreditAttorney team fight to ensure your legal rights are being enforced to the fullest extent permitted by law than the negative items on your credit report may in fact not have a permanent damaging effect on your credit.



What shows up on my credit report?

Collection Accounts
If your account is referred to collections or a collection agency this will appear directly on your credit report. These accounts can appear as paid or unpaid accounts. Regardless, any type of collection account is considered VERY negative by all lenders.

Each time a potential lender or credit grantor looks at your credit report, it is recorded on the report as an inquiry. If you have a significant number of inquiries over the last two years this may have a negative impact on your credit as the lender will become nervous that you are attempting to get too much credit.

Court Records
Court records can include things such as bankruptcies, liens, judgments, divorce, satisfied judgments and satisfied liens. These court records are considered negative by all credit grantors.

Merchant Trade Lines
These are the traditional items that you would think would be on your credit report. They include your regular credit lines like credit cards, auto loans, and mortgages. Information on late payments, if the line was part of a bankruptcy, charged off, or put into repossession will be considered negative by all lenders.



Will my negative items stay listed forever?

No. The federal Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act require that most negative items be deleted from your credit report by the end of seven years, except for bankruptcy, which can remain on your report for up to ten years. Inquiries can remain on your credit report for up to two years.



Can I view my credit report?

A lender or credit grantor is usually not permitted to show you your credit report. However, you are entitled to receive your credit report one time per 12 month period from each of the 3 major credit bureaus through the Annual Credit Report program via the link In addition, you are also able to purchase your credit report from various sources for a fee. For the vast majority of consumers who obtain their credit report from a bureau it is extremely difficult to fully understand what your credit report truly says due to the bureaus use of special codes to report the data. Rest assured though, we are happy to assist you in the process of reviewing and understanding the information on your credit report, even if you are not a client of our firm, as we are available to assist so that everyone has an opportunity to gain a clear understanding of the information presented on their consumer credit reports.



What if I only have a small amount of bad credit?

The smallest amount of bad credit can often result in a denial. In fact just one late payment may be enough. Even worse is the reality that even a large amount of positive credit cannot offset a small amount of negative credit. Unfortunately, the smallest amount of negative credit can significantly hurt your credit rating and result in the loss of thousands of dollars per year and many missed opportunities.



Who sees my credit report?

If you are one of the seventy five percent of consumers with negative information on your credit report it is important that you know that this negative information is being used more and more frequently to define your financial worthiness. Obviously, those granting you credit (i.e. for a loan, or credit card) will look at your credit report to see your financial history. More and more often, other non-financial groups are also looking at your credit report to determine if you are a worthy individual. Employers are increasingly using credit reports to determine if you should be hired, and insurance companies are even increasingly reviewing your credit report to determine whether to extend you coverage.



What is a charge off?

A charge off is the term used once you are so late on an account that the creditor determines you are likely not going to pay the debt. Once the creditor reaches this conclusion they write the debt off as a loss for tax purposes. However, the creditor will continue attempting to recover the debt by selling the debt to a new creditor or by sending it to collections.





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As with any legal work, no outcome is promised and your results may vary.

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