As time goes on, consumers are becoming more and more aware of the importance of both their credit rating and their credit score. These two pieces of information are vital tools for lenders, who use them to decide whether or not to grant a loan or credit to a consumer. Higher credit ratings and reports with positive entries have a tendency to lead to credit; low scores and negative entries tend to lead to declined applications. While consumers may understand the significance of credit reports, they may not understand what types of entries seem on the document or how long they stay there.
While the FICO score offers a quick summary of a potential borrower’s monetary health, it is the report that provides all of the details that lenders desire to see. Previous debts, installment loans and home loans are listed there, together with bankruptcies, tax liens and more. If you have a charge card, it is listed. If you had a car loan that you paid off five years ago, it’s listed, and the report will note whether you paid punctually and fully.
Positive entries on your report will include paid debts, open credit accounts in great standing and closed accounts. Contrary to popular belief, positive entries do not appear on your credit rating indefinitely. Open accounts stay on your report for as long as you have them, with additional entries if you make late payments. Closed accounts stay on your report for a maximum of 10 years. After that, they are removed from the report.
Negative entries on your report will consist of things like unpaid tax liens, bankruptcies, and unpaid installment loans or charge card debt. These are “red flags” that have a tendency to catch the attention of lenders rather quickly. If you have a number of negative entries and a so-so credit score, you may find it tough to obtain extra credit. On the positive side, negative entries disappear from your credit rating after seven years, with the exception of Chapter 13 bankruptcy filings, which stay for a full ten years.
The key to a healthy credit history is generally repaying your bills completely and on time. Prompt payment of your bills when they are due will also assist you maintain a healthy credit score. If you have negative entries, they will fade away in time, but good entries from open bank card accounts can stay indefinitely. For that reason, you should do your best to pay your bills promptly in order to keep your credit score in tip-top shape.
