Cleaning your Credit

We’ve established the “new year, new me” ideology and accepted that change will be inevitable in 2019, but where do we go from here?  With a god-like willpower and a passion for changing our financial future, let me introduce you to your neglected friend, the credit report.

I’ve found in my years of working in the financial industry, that most people don’t understand how credit reporting works, or even what it is.  Your credit report is like that gift a relative gives you that you can’t get rid of.  For me, it is this gaudy clock that I hang in the guest bedroom, so that when grandma comes to visit, she can be the one to enjoy it.  I have to keep it clean and dusted so it doesn’t look neglected when the family comes for a visit.  Now think of your credit report as that awful clock, and your family consists of bankers, lenders, application approvers, and employers.  Now that we have that poor analogy, let’s explore some of the most commonly asked credit reporting questions and then we can learn how to clean it up!

What affects my Credit Score the most?

There are a lot of things that affect your credit report in positive ways.  Credit cards, car loans, and mortgages can be positive “credit”.  If you keep on top of your payments, you can typically maintain a pretty high score.  The things that affect your report negatively are missed or late payments, unpaid debts, bankruptcies, and court judgments.

How long does negative information stay on my credit report?

Negative information on your report is not good and stays on your credit report for longer than you think.  Most “delinquencies,” or late payments/collection items, stay on your report for 7 years.  The time line can be even longer if you file bankruptcy, where the negative information can be reported for 10 years.

What happens if I have a poor credit report?

This is the most common thing I find people don’t always understand.  If you have a poor credit score (usually under 600) this can keep you from buying a house, financing a car, renting an apartment, or even getting a job.  Lenders and businesses want to know whether you will pay your bills, better yet, pay them on time, before they agree to provide their service. That’s why checking your report and keeping it clean is so important!

With all this new information, what can we do with it?  The only thing to do now is rip the band aid off, pull our credit reports to assess the damage. When reviewing what is there, don’t panic.  If there are open items on your report that need to be resolved, call the agency listed next to the item and they can explain what it is for.  If it’s a balance you know you owe, pay it and ask for a courtesy retraction.  I can’t guarantee every agency will provide one, but they at least can close it and credit score improvement begins!

2019-01-30T19:19:28+00:00January 30th, 2019|ABC's of Financial Freedom, Tips and Tricks|