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Credit Report Basics for Understanding Credit Reports and How to Improve Credit Reports


Credit Report Basics

Basically bad credit, also known as derogatory credit or adverse credit, may be reported on your credit report for seven years. Some bankruptcy information may be reported for up to 10 years.

Even if you pay a past due account balance to zero, the bad credit experience can continue to be reported on your report for up to the seven years. Even if you close the account, the bad credit may remain on your credit report for seven years. Except in a few instances, accurate derogatory information can generally stay on your report for seven years. Only the passage of time can assure its removal.

For calculating the seven-year reporting period, generally the period runs from the date that the event took place.

As an example, if you were late on a payment in January, but then you caught up in March, the January late could be reported for seven years. If you were late again in October, but you did not catch up before the account was turned over to collection the following January, and you made no more payments on the account, and it was eventually charged to profit and loss the following June, the collection activity and the charge to profit and loss can be reported for seven years from October, which was the month of the delinquency that occurred immediately before the collection activity and charge to P&L.

More Credit Report Basics

In additional to information on your payment habits in paying your credit accounts, your credit report may also contain information on other names you may have used, e.g. aka's or "also known as" names. For example Richard Smith might have an aka on his credit report of Dick Smith, if he went by Dick sometimes.

There may information on past addresses in your credit report about where you have lived or received your credit card and bank statements. There may be some history of your employment, including past and perhaps current employers.

There may be consumer statements on your credit report that you have added to your file, or there may be fraud statements or credit freezes on your credit report.

Some credit reports include creditor information to you that may provide you with the address, and/or phone numbers of your creditors.


Understanding Credit Reports

For understanding credit reports, start by getting a copy of your report from all 3 bureaus and reviewing it closely. Especially make sure all the items on your report are reasonably accurate.


Improve Your Credit Report

How to Improve Your Credit Report yourself comes down to basics, such as:

  • Dispute inaccurate items in your report. There's no reason to let inaccurate items stay on your credit report.
  • Pay off any collections or past due amounts, so your these items have zero balances on your credit report.
  • Pay down loan balances if you are able. Lower balances relative to your credit limits are usually good for your score.
  • Try to have a period of 12 to 24 months with no late payments, past dues or other derogatory items. Recent past dues can lower your score.
  • Try to minimize the number of inquiries into your credit report from credit grantors, by not applying for credit unless absolutely necessary. These types of inquiries may lower your credit score. Note a credit report inquiry for you to review your own report should not have an adverse affect on your credit score.

For more information on our site about disputing information on your credit report, please see: How to Dispute Inaccurate Items on Your Credit Report