Understanding Your Credit Report

Online, October 24, 2011 (Newswire.com) - Lots of things can contribute to a bad credit report, and bad credit can remain on your credit report for seven years.

Each item of bad credit has a certain designation for identification purposes. Items can include bankruptcy, repossession, foreclosure, past due payments, judgments and tax liens. But bear in mind that if you find inaccurate or incomplete information listed on your report, it is your right to dispute it. But in order to dispute anything on the report, you must first know how to decipher its contents.

When you receive a copy of your credit report, the first thing you should do is to determine which items on the report are charge-offs, which are defined as an account that has been past due for at least six months and is considered a loss. Charged-off accounts are viewed are assigned a credit rating of "9" on a credit report. This number can be preceded by an "I" for installment loan or an "R" for revolving account, such as a credit card.

Next, you should locate and review your credit ratings. When an account is late by 30 days, it shows up on your credit file. If a payment isn't made by the next month, it becomes 60 days late. If you see an R1 or I-1, it means the account is paid on time. An R-2 means it is 60 days past due, while an R-4 means it is past due 90 days.

The information reported to credit reporting agencies is called trade lines. The information listed includes the name of the creditor, balance, date last paid, type of account and the credit limit. The credit rating will appear at the end of the account to the far right.

Once you have established credit, you are assigned a credit score, which can range from 300 to 850. The higher your score, the better terms and conditions you will receive on credit products like loans, lines of credit, auto loans and credit cards.

A foreclosure can reduce a credit score of 680 by 85 to 105 points, a score of 780 can be reduced by 140 to 160 points. Bankruptcies can reduce a score of 680 by 130 to 150 points, and a score of 780 can be reduced by 220 to 240 points.

Bear in mind that a look at your credit report is like getting a snapshot of your credit at any given time. You can make efforts to clean up and improve your credit - but it won't happen overnight. It took time to get your credit into a mess, and it will take time to clean it up.