Credit Reports Can Help You and Hurt You

As time goes on, people are becoming more and more aware of the importance of both their credit score and credit report. These documents are vital financial tools for lenders, who use them to determine whether or not to grant a loan or credit to an individual. Higher credit scores and reports with positive entries have a tendency to lead to credit or loans; low scores and bad entries tend to lead to having requests declined. While individuals may recognize the importance of credit reports, they may not understand what kinds of notations appear on the document or how long they remain there.

While the FICO score offers a quick distillation of a prospective borrower's financial state, it's the report that offers all of the details that lenders want to examine in detail. Previous debts, car loans and mortgages are recorded there, along with bankruptcies, tax liens and more. If you have a credit card, it is listed. If you had an automobile loan that you paid off five years ago, it's listed, and the report will note whether you paid on time and in full.

Positive entries on your report will include paid bills, open charge accounts in good standing and dormant accounts. Contrary to common belief, positive entries do not stay on your credit report indefinitely. Open accounts stay on your report for as long as you have them, with additional notations if you make late payments. Old accounts stay on your credit report for a maximum of a decade. After that, they are removed from the report.

Negative entries on your report will consist of things such as unpaid property tax liens, debt filings, and unpaid home loans or charge card debt. These are "red flags" that have a tendency to grab the attention of lenders rather quickly. If you have a couple of bad entries and a ho-hum credit score, you may find it hard to obtain additional credit. On the positive side, negative entries disappear from your credit report after seven years, with the exception of Chapter 13 debt relief filings, which stay for a full a decade.

The key to a healthy credit report is always paying your bills in full and promptly. Prompt payment of your debts when they are due will help you maintain a healthy credit score. Should you have negative entries, they will fade away in a few years, but positive entries from open credit card accounts can stay indefinitely. It is worth your while to do your best to pay your bills when they are due so that you might keep your credit report in tip-top shape.

©Copyright 2007 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing , a firm devoted to affiliate marketing, and Debt-Stopper.com, a site about debt consolidation, personal bankruptcy and other financial matters.