Your credit report plays a critical role in your overall financial health. The information that it contains will affect your ability to get new lines of credit, rent an apartment, and sometimes even get a job or promotion. It’s important to understand all of the information on your report and what types of negative listings it might include.
Every person’s credit report has the following:
- Personal information. This includes information like your name, current and previous addresses, social security number, date of birth, and possibly current and previous employers.
- Credit accounts. All of your current and previous credit accounts are also listed along with details like status (if you have overdue payments), credit limit, monthly payment, and current balance. Auto loans, student loans, credit cards, and any other type of credit accounts in your name will be listed.
- Inquiries. When a lender pulls your credit file, generally when you apply for a new line of credit, it’s called a hard inquiry. Hard inquiries stay on your report for up to two years and may lower your credit score by a small amount. People with many hard inquiries on their report might be seen as higher risks. When a lender or business requests your credit file for another purpose than new credit, like to promote a special offer or rate on a product, this is a soft inquiry. Soft inquiries don’t have an affect on your credit.
- Negative listings and public records. Late payments, debt, accounts in collection, repossessions, accounts in default, bankruptcies, foreclosures, and judgments are all listed on your credit report. Negative information can stay on your report for up to seven years and it will lower your credit score. It may make it more difficult to get approved for new credit, or could result in higher interest rates on any loans or credit that you are approved for.
What you can do about negative listings
Negative listings that bring your credit down are frustrating, especially if you’re making an effort to improve your financial situation. If you have late payments listed on your credit report and you have since caught up on your payments for the account, try writing a goodwill letter to the creditor. A goodwill letter explains why you missed the payments and asks the creditor to remove them from your report. These letters don’t always work, but it’s worth trying if you want the listing removed. This article from NerdWallet has a sample goodwill letter.
You can also try to negotiate with the creditor. See if they’re willing to remove the negative marks if you offer a payment or enter a repayment plan.
If you can’t get negative listings removed, you’ll have to wait. Focus on paying your bills in full and on time moving forward, and using less than thirty percent of your available credit. Work to pay down debt over time. These positive actions will help improve your credit and show that you’re on the right track, even while the negative listings remain.