How Important Is It To Understand Your Credit Report?

You almost certainly know only too well that the information which is contained in your personal credit report is used by the credit card and loan companies when determining whether to extend credit to you, but are you aware of what is actually in your personal credit report? Did you know for instance that the information which are contained in your credit report could affect whether or not you can buy that new house or are going to need to stay in your present 'shoebox'?

In many cases people think that if a company looks at your credit report that company is just looking at your credit score and, although this is without doubt one of the things that they do look at, they are looking at a great deal more. Above all, they are looking to see how much debt you have in comparison to your income and even quite small accounts, such as those with a mail order catalogue company, will be treated as a deduction from your income when considering an application for a loan.

If a credit card company or other lender comes to the conclusion that you have less money coming in than you have going out then your loan application will automatically be reject. Indeed, by law a certain percentage of your income must be available to meet the payments on a loan before the lender can approve it, regardless of the reason for the loan.

Lenders are also looking at your credit history for the last seven years to see how you have managed any loans during that period. Specifically, they are looking to see if you have made payments on time and will take note of any payments which were 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 with your payments for a few months on one of your accounts, however any lender will certainly take this into account when determining the risk of lending to you now.

A lender is also going to see whether or not any of your accounts have run into debt over the past seven years and whether or not these debts have now been paid. If there are outstanding payments on an existing loan agreement lenders will be very wary about giving you additional credit until these are cleared.

Finally, your credit report will show if you have filed for personal bankruptcy, usually within the past ten years. A few people think that a company is more likely to advance you credit if you have filed for bankruptcy because they enjoy the added protection of knowing that you may not file again for a number of years. However, this is not true and filing for personal bankruptcy is viewed as a warning flag by the credit card and finance companies showing that you have already demonstrated a tendency to get yourself in over your head when managing your finances.

Your credit report is an important document which you ought not only to understand but which you should review occasionally for your own protection and peace of mind. Luckily, the law requires that you be given a copy of your credit report once a year on request and the first thing you need to acquaint yourself with is how to obtain your free annual credit report. Having gotten your report you then have to study it with care to make sure that it is accurate and then to ask for it to be amended if it is not. Also, there are some circumstances in which you can ask for alterations to your personal credit report, even when it is correct, and here you need to have the answers to hand for questions like how can I remove a judgment from my credit report?