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Credit Report Entries – The Good and the Bad
By Charles Essmeier
As time goes on, consumers are becoming more and more aware of the importance of both their credit report and their credit score. These two pieces of information are vital tools for lenders, who use them to decide whether or not to grant a loan or credit to a consumer. Higher credit scores and reports with positive entries tend to lead to credit; low scores and negative entries tend to lead to declined applications. While consumers may understand the importance of credit reports, they may not understand what kinds of entries appear on the document or how long they stay there.
While the credit score offers a quick summary of a potential borrower’s financial health, it’s the report that provides all of the details that lenders want to see. Previous debts, installment loans and mortgages are listed there, along with bankruptcies, tax liens and more. If you have a credit card, it’s listed. If you had a car loan that you paid off five years ago, it’s listed, and the report will note whether you paid on time and in full.
Positive entries on your report will include paid debts, open credit accounts in good standing and closed accounts. Contrary to popular belief, positive entries do not appear on your credit report indefinitely. Open accounts stay on your report for as long as you have them, with additional entries if you make late payments. Closed accounts stay on your report for a maximum of ten years. After that, they are removed from the report.
Negative entries on your report will consist of things like unpaid tax liens, bankruptcies, and unpaid installment loans or credit card debt. These are “red flags” that have a tendency to catch the attention of lenders rather quickly. If you have a number of negative entries and a so-so credit score, you may find it hard to obtain additional credit. On the positive side, negative entries disappear from your credit report after seven years, with the exception of Chapter 13 bankruptcy filings, which stay for a full ten years.
The key to a healthy credit report is always paying your bills in full and on time. Prompt payment of your bills when they are due will also help you maintain a healthy credit score. If you have negative entries, they will fade away in time, but good entries from open credit card accounts can stay indefinitely. For that reason, you should do your best to pay your bills promptly in order to keep your credit report in tip-top shape.
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