How Important Is It To Understand Your Credit Report?

                                                                                         

You perhaps know only too well that the information in your credit report is used by the credit card and loan companies when determining whether or not to extend you credit, but are you aware of exactly what information your credit report contains? Did you know for instance that the details that are contained in your credit report could affect whether or not you can purchase that new house or are going to have to stay in your present 'shoebox'?

In many cases people believe that if a credit card company or other lender looks at your credit report that company is just looking to see your credit score and, while this is certainly one thing that they do look at, they are in fact looking at much more. In particular, lenders are looking at the amount of debt you have compared to your income and even relatively small accounts, such as those with a mail order company, will be considered as an income deduction when when it comes to considering a loan application.

If a lender concludes that you have got less money coming in than you have going out then your application will certainly be reject. Actually, by law a specified percentage of your income has got to be available to meet loan payments before the lender can approve it, regardless of the reason for the loan.

Lenders are also looking back at your credit history over the last seven years to see how well you have handled loans in existence during that period. In particular, they will look to see if you have made your payments on time and will play close attention to any payments that you made more than thirty days late. It might not have seemed particularly important to you at the time that you ran into a few problems and were late making payments for a few months on an account, but a new lender is certainly going to consider this when assessing the risk of lending to you now.

A lender will also look to see whether any of your accounts have run into debt over the last seven years and if these debts have now been paid off. If there are payments outstanding on an existing loan agreement lenders will be very wary about giving you additional credit before these are cleared.

Finally, your credit report will show if you have filed for bankruptcy, usually within the past ten years. Some people believe that a company is far more likely to advance you credit if you have filed for bankruptcy because they enjoy the added protection of knowing that you are not able to file again for several years. However, this is not true and filing for bankruptcy is viewed as a warning flag by the credit card and finance companies indicating that you have already demonstrated a tendency to get yourself in over your head when it comes to handling your money.

Your credit report is an important document and one which you should not only understand but that you should review from time to time for your own protection and peace of mind. Fortunately, the law states that you must be sent a copy of your credit report once every year on request.

About the author:
TheDebtAssistanceCenter.com provides information on how to obtain your free annual credit report and answers a wide range of questions such as how can I remove a judgment from my credit report?


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