How Creditors Read Your Report

Are you the type of person who treats small information as trivial

? Beware, your credit scoring may be affected by small information that you take for granted. Although you are aware that the biggest percentage of your credit score comes for your payment history, your creditors may look at some information that you would not really give that much attention to. This information includes inquiries, other open credit accounts, missed payments, maxed-out credit lines, and debt-to-income ratio.

Your credit report is an information-rich material that is on the interest of a variety of people. Each time they look into your report, they are making inquiries. An inquiry may be hard or soft. Hard inquiries are made when you apply for a new credit card, for example, because creditors will assume you either are in deep financial situation or you are planning to take on a huge debt. Hard inquiries will mark you as a high credit risk. Soft inquiries are those that don't show up on your report and may be an inquiry you made for personal interests, employer requests, and marketers requests to get your name to sell something to you.

Meanwhile, you may have other credit accounts that you have forgotten yet are still open. Open credit accounts, though inactive, may be interpreted by creditors as impulsiveness or you putting yourself easily into a financial danger. Experts say you can keep the oldest card because it has much payment history. Four to six credit cards may also be kept but all other accounts that are to be closed. Your credit scoring will also be affected by missed payments so always remember to pay on time because the charge-off or collection action will stay on your report for seven years.

Remind yourself constantly not to go beyond your credit limit when using your credit cards. A maxed-out credit line will appear to lenders that you are on a tight financial situation. This will not be good even for an almost pristine credit report. If you are in this situation, try moving your debt to other credit cards that are not maxed out. In relation, your debt should not be more than 20% of your annual income. This can make lenders not trust that you can pay or increase your interest rate.

To make sure that creditors are receiving accurate information, try getting a 3 in 1 credit report or a report coming from the three major credit bureaus: Experian, Equifax, and TransUnion. Compare if the information on each is correct and accurate because any inaccuracy could lower your credit score. It may happen that a small credit company failed to report your financial dealings with them to all three companies.

by: Leo Chu

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