What Does Your Credit Report Says About You?

Oct 15, 2008 Credit Advice

You almost certainly know only too well that the information which is contained in your personal credit report is used by the credit card and finance companies when determining whether to extend credit to you, but are you aware of exactly what is actually in your credit report? Did you know for example that the information contained in your credit report could determine whether or not you can buy that new house or will have to stay in your present ’shoebox’?

Many people believe that if a company looks at your personal credit report they are simply looking at your credit score and, although this is definitely one thing that they do look at, they are in fact looking at far more. Above all, lenders are looking to see the amount of debt you have in comparison to your income and even relatively small accounts, like those with a mail order company, will be treated as a deduction from your income when considering an application for a loan.

If a credit card company or other lender sees that you have got more money going out than you have coming in then your request will automatically be turned down. In fact, the law requires that a certain percentage of your income must be available to meet the payments on a loan before the lender is allowed to approve it, regardless of the purpose of the loan.

Lenders will also be looking back at your credit history for the past seven years to see how you have managed any loans during that period. In particular, they will look at whether you have made your payments on time and will take note of any payments that were more than thirty days late. It may not have appeared especially important to you at the time that you ran into a few problems and were late making payments for several months on an account, but a new lender is certainly going to take this into account when assessing the risk of lending to you now.

A lender is also going to look to see whether or not any of your accounts have run into debt over the past seven years and if these debts have now been paid. If you have payments outstanding on an existing agreement lenders will be very wary when it comes to extending you additional credit before these are paid off.

Finally, your credit report will also show if you have filed for bankruptcy, in most cases in the previous ten years. Some people think that a lender is far more likely to lend to you if you have filed for bankruptcy as they enjoy the added protection of knowing that you are not allowed to file again for a number of years. However, this is not true and filing for personal bankruptcy is viewed by lenders as a warning flag showing that you have already demonstrated a tendency to get yourself in over your head when it comes to managing your finances.

Your personal credit report is an extremely important document that you should not only understand but which you ought to review occasionally for your own protection and peace of mind. Happily, the law states that you must be provided with a copy of your credit report once each year if you request it and the first thing which yu ought to acquaint yourself with is how to obtain your free annual credit report. Once you have got your report you then need to look through it with care to ensure that it is accurate and then to request that it be changed if it is not. Also, there are some instances in which you can request alterations to your personal credit report, even when it is accurate, and here you need to have the answers to hand for such questions as how can I remove a judgment from my credit report?

Tags: credit bureau, credit reference agency, credit report, obtaining credit