What's On My Credit File

How Information Ends Up On Your Credit File

If you’re considering getting a loan of some kind, you probably know the importance of a good credit score. You might even know how your credit score is determined.

A credit score is made up of several pieces of information. According to myFICO, there are five things that are taken into account, each accounting for a different percent of the score.

Payment history makes up 35%; amounts owed, 30%; length of credit history, 15%; and new credit and credit mix each make up 10%.

Information That Sticks

Once the credit bureaus have a piece of information that fits into one of these five categories, it will be included on your credit report for a certain number of years, depending on the type of information.

According to Equifax, one of the three credit bureaus, positive information will stay on your credit report for as long as 10 years after the most recent activity. This includes things like paying your bills on time and closing out loans.

Late payments will stay on your report for about seven years after the date of the missed payment. Tax liens will also stay on your report for about seven years if they are paid. On the other hand, unpaid tax liens could still be affecting your report 15 years down the road.

Learning About Your Credit

With all of this information playing a part in your credit score, you may be wondering how they gather these facts in the first place. According to the Federal Reserve, these bureaus collect information from creditors, like banks and credit card companies. They also get information from public records.

Experian, another credit bureau, explained there are three types of public records that can affect credit scores: tax liens, bankruptcy and civil judgments.

  • Liens are the result of unpaid taxes.
  • Bankruptcy comes in two forms: Chapter 13 and Chapter 7. In each of these, the person is forgiven any debt they can’t afford to pay.
    • In the first type(Chapter 13), the person has to pay part of the debt and the instance stays on his or her record for seven years.
    • In the second(Chapter 7), no payment is required, but the record is kept on file for a decade.
  • A civil judgment is typically the result of losing a lawsuit and owing a fine as a result. Once this is paid, the record will be updated to reflect the paid debt.

Who Cares About Your Credit File

All of this data is compiled for a reason. Creditors use credit scores to determine whether you are a trustworthy borrower. A high credit score shows creditors, such as mortgage lenders, banks and landlords, that you regularly pay your bills and are likely to continue doing so.

However, a low credit score says that you have had some problems in the past or are experiencing some now.

A low credit score will make finding a loan more difficult.

However, it is not the end of the world.

Each piece of information is updated regularly and events such as late payments and even bankruptcies only stay on your report for a certain period of time.

The important thing is that you begin to make some adjustments to your financial health to help your score improve.

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