If you’ve ever dinged your credit, you might feel like you’re in consumer purgatory. Waves of anxiety might sweep over you, especially if you’ve been working hard at rebuilding your credit. And you’re afraid that you might be denied financing when you need it.
How much damage has already been done to your credit? As your credit health largely affects your ability to qualify for a credit card, car loan, or mortgage with favorable terms and conditions, you’ll want to know.
Getting your head around exactly how credit works can be intimidating. Not to worry. We got you covered. In this post, we’ll give a rundown of what goes on a credit report, how long each piece of information stays there, and how it might impact you:
CREDIT REPORT 101: WHAT’S INCLUDED ON A CREDIT REPORT?
Also known as a credit file, a credit report provides a detailed history of how you’ve used credit. It usually includes:
Your personal information: Basic details about your identity, such as your full name, including aliases; birth date, addresses of places you’ve lived, both past and present; phone numbers; employment history; and Social Security number. Your personal information doesn’t affect your credit score.
Trade lines: Information about all your accounts. These involve what’s called revolving credit, such as credit cards, retail credit cards, and home equity lines of credit; and installment credit: car loans, personal loans, student loans, and mortgages.
This section in your credit report will also include names of the lenders and creditors, account numbers, your credit limit or loan amount, balances, and payment history.
Public record and collections: Yup, your bankruptcies, liens, and court judgments are included in your credit report.
Recent inquiries: A list of parties who have asked to see your credit report. Here’s where you’ll see lenders, landlords, employers, and insurance companies. It also includes the date of these inquiries. This section includes inquiries from the last two years, and includes both ones you’ve made (voluntary inquiries), and ones made from lenders (involuntary inquiries).
WHAT’S NOT INCLUDED ON A CREDIT REPORT?
Oftentimes there’s a bit of confusion as to what isn’t on a credit report. Marital status, bank account information, and most utility payments aren’t part of your credit profile. However, utility payments that have been passed to collections or defaulted most likely will be reported to the credit agencies.
A note about credit scores: The two most largely used credit scoring models are FICO® and VantageScore®. And while many people think there’s only one credit score, it turns out there are many. There’s also what’s called an Auto Credit Score, which is calculated by FICO. It’s used by automobile lenders to gauge your creditworthiness.
WHAT CAN NEGATIVELY IMPACT MY CREDIT SCORE?
There’s a number of things that can negatively affect your score, and how long they stay on your credit profile:
Late or missed payments. This is pretty straightforward, but being tardy or missing payments altogether on your credit cards, loans, or utilities can hurt your credit. This can stay on credit profile for up to seven years from the date of delinquency.
Charge-off. This is when a creditor has determined that they won’t be receiving payment from you, and considers your account as a loss. The account is then closed. The past due date and outstanding balance might still be reported. What’s more, many times the amount owed goes to a collection agency. Charge-offs can stay on your credit report for seven years.
Repossession. Can’t make the payments on a vehicle you have a loan on? The lender might try to take back collateral, such as a car with a default loan. This will stay on your credit for seven years.
Foreclosure. If you are struggling to pay your mortgage, and the lender takes back the house, you’ll go into foreclosure. Like repossession, this stays on your credit file for seven years.
Voluntary surrender. Let’s say you’re unable to continue to make the agreed-upon payments on a car loan. With hands up in the air, you ask the lender take it back. This voluntary surrender will show up on your credit file. The amount owed might be turned to a collections agency.
Bankruptcy. If you’re debt load becomes unmanageable, you could declare bankruptcy. Bankruptcies can stay on a report for up to 10 years. There are two main types of bankruptcy: Chapter 7 and Chapter 13. While you file Chapter 7 bankruptcy, it stays on your credit report for 10 years. That’s because none of the debt will get repaid.
When you file Chapter 13 bankruptcy, because it entails a three to five year debt payment plan in which you’ll repay at least part of the amount owed, it’ll stay on your credit report for seven years.
Debt in collections. This is when a creditor passes debt you owe to a collection agency, which then attempts to secure payment from you. This can stay on your credit profile for up to seven years.
Settled accounts. Your debt is considered settled when the creditor agrees to accept payment for less than you owe. These stay on your credit file for seven years.
Hard inquiries. Hard inquiries are instances when you apply for credit and lenders request to see your credit. While they stay on your credit profile for two years, they only affect your credit score and credit history for 12 months.
TIME HEALS ALL WOUNDS
An important factor to keep in mind is time – exactly how much a negative item on your credit report impacts your score will change with time. A missed payment that happened in the past six months is much more impactful than a missed payment from six years ago.
So while many items will stick around on your report for years and years, that doesn’t mean you’re doomed to seven years of terrible credit. The sooner you get back the basics of good credit, the sooner you’ll find your score back on the rise.
WHAT IF THERE’S AN ERROR ON MY CREDIT REPORT?
When you order a credit report, it might come from each of the three major credit bureaus—Experian, Equifax, or TransUnion. And each credit report might have slightly different information. If you spot any errors, you’ll need to file a dispute with the respective credit bureau. You only need to contact all three if it’s an error that shows up on all your reports.
You can file a dispute online, by phone at 1 (888) EXPERIAN or via mail:
P.O. Box 4500
Allen, TX 75013
There’s information on the Equifax website on how to file a dispute online. You an also file a dispute by phone at 1 (888) 548-7878, or mail in a form:
Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374
You can file a dispute online, by phone at 1 (800) 916-8800 or by mailing a dispute request to:
Consumer Dispute Center
P.O. Box 2000
Chester, PA 19016
HOW CAN I ORDER A CREDIT REPORT?
There are more ways than ever to check your credit score. Popular credit monitoring services such as Credit Karma and Credit Sesame enable you to track your credit score for free. Plus, a handful of money management apps and credit card networks also now offer free credit scores.
But when it comes to a full credit report, you can order one for free from each of the three major credit bureaus—Experian, Equifax, and TransUnion—during a 12-month cycle. Just visit AnnualCreditReport.com. Beware of sites that look very similar and ask for payment. It shouldn’t cost you anything if you order it from the official site.
If you would like help understanding how credit works, how your past actions might impact your score, or how to begin repaying your credit card debt, talk to us. Our counselors are here to help, 24/7.