Once you have your credit report, it is important that you know how to read the report and understand the special coding included. Although credit reports don’t look alike, they contain many of the same items. When reviewing, check the details. Make sure your name is spelled correctly, and that your date of birth and social security number are correct. If these items are incorrect, this could cause some problems. Someone else’s credit history may be mistakenly included in your file!
Your creditors are listed on the report. The first thing to do is to find and circle each of the negative remarks or “dings” in your credit file. Information on these reports is usually coded like your bank statement. The law requires credit bureaus to explain anything on the report that you cannot understand. You will find a key to the coding symbols. Next, look for damaging remarks in the Historical Status section of your report.
Identify the negative marks on your credit report.
Most damaging remarks are “past dues.” A “past due” is noted whenever your payment wasn’t received within 30 days of being due. Your payment must actually be credited to your accounts before the due date, not merely mailed by that date-to avoid a late payment mark. Most “past due” notations are correct. However, there are times when entries are made accidentally, or the mail delivered your payment late, or there was a delay in processing your payment.
The comments section may, for instance, contain remarks such as “COLL ACCT”. “COLL ACCT” means “collections agency account.” When a creditor lists an account this way, the creditor has turned the account over to a collections agency as it was seriously past due. Other negative entries may include:
CURR WAS FOR.
Foreclosure proceedings began on your account. However, all past due amounts have been paid and the account is now current.
CURR WAS 30-2.
Your account has twice been 30 days past due, but is now current.
DEED IN LIEU.
You gave a creditor a deed to your property to prevent them from foreclosing.
DEL WAS 120.
At one point, your account was 120 days past due. You have made some payments, but the account is still 30, 60, or 90 days late.
You failed to repay a government loan, and the government filed a claim against you.
A foreclosure occurred on your property as you failed to pay the creditor.
NOT PAY AA.
An outstanding balance still exists and you are not paying according to the agreement.
CHARGED TO P & L.
The creditor charged-off the debt on their profit and loss statement as they felt it was uncollectible.
Your property was repossessed because you failed to repay your loan.
To prevent repossession by a creditor, you voluntarily surrendered your property.
Your payments are at least 30 days late on one or more accounts.
Negative remarks from public record data must also be examined closely for accuracy. These include:
It indicates you once were financially unable to pay your obligations when due.
You owe taxes and an IRS or state tax lien was entered against your property.
There is now a judgment on record against you due to losing a lawsuit either at trial or because you failed to defend.
A pending lawsuit was resolved before trial.
You failed to pay court-ordered child support.
A bankruptcy case was withdrawn.
Either the court ruled in your favor or the creditor failed to show up and your case was dismissed.
Bankruptcy was filed and the court relieved you of your debts.
Paid and Satisfied
A court judgment or a collections account has been fully paid.
There is a legal action pending against you.
Any of these marks, of course, signifies a bad credit risk. Inquiries made by creditors from whom you applied for credit will also be listed in the report. Too many credit inquiries within a short span of time can be taken as an indication that you are having financial problems and seeking more credit to solve them. Creditors can refuse credit when there are too many inquiries. Each creditor determines how many inquiries are “too many”. To offset the problem, you can have a 100-word (or less) statement added to your credit report to explain in a positive way why you have so many credit inquiries.
Creditors also look for patterns of behavior regarding credit usage. For example, holding or applying for several credit cards may be detrimental to future credit applications, even if your existing credit cards have zero balances. In addition, your “debt ratio” (the percentage of your monthly income that is spent in debt payments), may be too high. As a homeowner, your debt ratio should not exceed 20-25 percent of your income, as a renter, your debt ratio should not exceed 8-15 percent of your income. Still confused? The right credit union can help you stay on top of your finances. Visit Riegelwood Credit Union to learn more.
Your credit report will also include an “Account Profile” column. This column contains a summary rating for each account. A summary may read “positive,” “negative” or “non-rated”:
- “Positive means you pay on time.
- “Negative” means serious credit problems, perhaps a defaulted debt.
- “Nonrated” may signify a few late payments, which still gives you a weak credit report even when there is no strongly negative entry.
Each negative or non-rated entry has a code that reflects the nature of the problem. Your goal is to protest and eventually remove every negative or non-rated profile.Read More