Credit Report Facts

Your credit report is your financial report card. It tells how you borrowed money and your history of how you paid it back. Quick Facts: Your credit score is a number that lenders use to help them decide whether to give you a loan and what interest rate they should charge. Higher scores are better.

In general a score higher than 740 is very good and below 600 is not very good. Pay all bills on time. If you have missed a payment on an account, catch it up. Keep balances low on credit cards. Pay off your debt instead of moving it around. Keep your positive payment history - don’t close your oldest account. Apply for new credit cards rarely. Shop for mortgage or car loans in a short period of time.

Be aware that your financial life will be under scrutiny more severe than good-credit homeowners. Your interest rates will be higher, fees will be higher, and you will have longer periods waiting for approvals. Here is advice to get you rolling. Obviously, there is no magic secret to improve credit scores overnight, but you can make a couple of moves to clean it up.

First, go online and get your credit scores from the three credit reporting agencies: Equifax, Experian, and TransUnion. Laws exist that allow you a free report from each once a year. Having your credit scores in hand will let your know where you stand before you even approach lenders. Once you have your credit reports, scrutinize them. If – there often are – any mistakes, write a registered letter to the reporting agency telling them in excruciating detail about the bad item and why it should not be on your report.

Those errors can be erased in a couple of weeks. Also, make sure all outstanding debts are current, even if you are in the midst of a dispute with any of the creditors. That lets prospective lenders know that you are willing to play by the rules. As a first-time homeowner, do not be looking for your dream home.

Few new owners do. With bad credit, you should look to lower your sights a little anyway. A first home is to get you from throwing away money on rent and to start building equity. Save your dream home for later in life when your career is finally starting to pay off and after you have methodically rebuilt your credit scores.

Also, you might want to pay particular attention to houses with owners who are willing to sign over the property and allow you to make the payments directly to them. You can thus avoid a lot of fees and outlandish interest rates. These are called owner carried mortgages or contracts for sale. Just be very careful and know the terms inside and out before you plop down any money. In spite of the advantages, these sorts of loans do not have the usual protections in place for standard loans.

Similar to the homeowner deal mentioned above, another flexible way exists. Many sellers in a tight place are eager to unload a property they no longer want or can no longer afford. They often will offer lease to ownership or rent to own deals. They will take your rent to meet their mortgage, but usually will negotiate with you to apply a certain amount of that monthly rent payment towards a down payment or a cut in cost of the property.

Again, just be careful and know what you sign. You might be able to approach owners who just have a for rent sign sitting on their property and find them willing to enter into such a deal. Bad credit does not rule out home ownership. Clean up your credit act as much as you can. Be prepared to be flexible. Be careful. Nobody has the right to cheat you just because you have bad credit.

Improve credit score: When does negative information “fall off” my credit report, How long does it take to improve a credit score, Negative credit history — late payments, judgments, foreclosures, charge-offs, bankruptcies and collections — can stay on your credit report for seven to ten years. But you can improve credit score values fairly quickly. Fortunately, the effect of these events on your credit score lessens every month.

Replacing bad history with on-time payments and good debt management can help raise your credit score in much less time. What do the seven-year and 10-year marks mean, Positive information on your credit report can stay on your credit history indefinitely. Late payments may hang around for up to 7 years.

Most negative items simply drop off your credit report after seven years. The seven-year mark does not erase the actual debt, however, if it’s unpaid. You still owe the money. Creditors, lenders and debt collectors can still go through appropriate legal channels to collect debt from you. These entities can call you, send you letters, and even garnish your wages if granted permission by the courts. It’s possible that you could even be sued for unpaid debts.

What about collections, judgments and charge-offs, Collection accounts can stay on your credit report for 7 years plus 180 days from the date of the delinquency that immediately preceded the collection activity. What many people don’t realize, is that even after you’ve paid the collection account, it can still stay on your report for that 7-year plus 180 days period. Unfortunately, frustrating folks trying to “make good” by paying off collections, some credit scoring models do not give you credit for repaying collection accounts. Another consideration is that derogatory accounts count less as they age.



For this reason, experts often recommend that you do not pay a very old collection account because that makes the account a “new” derogatory item. Tip: You may be able to improve credit score ratings by negotiating with collection agencies that they remove the negative account once it’s been paid.