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Even though George Washington couldn’t tell a lie, it’d be unlikely that a creditor would approve him for a loan without taking a gander at his credit file. Whether it’s a credit card, personal loan or home loan, somewhere down the line your credit file is going to be a determining factor for how much — if approved — you’re able to borrow.
In a world where you can swipe plastic nearly everywhere, having a solid understanding of your consumer credit file and knowing how to avoid being credit invisible will put you in the best possible position to be approved when applying for credit.
A credit file is a collection of raw information consisting of personal and financial details obtained from credit card providers, banks, mortgage and loan providers, and any other services you’ve borrowed money from. Your financial information is stored in a massive credit file database and used by credit reporting agencies to calculate your credit score.
What makes up your credit file is a variety of raw data including:
The three credit bureaus — Equifax, Experian and TransUnion — gather information from credit files and display it the form of a credit report to give lenders an idea whether borrowers run the risk of defaulting, going bankrupt or mismanaging their debts.
While different bureaus may have similar information, one bureau may have an account on file that the other has overlooked because not every lender reports their activity to all three bureaus.
Think of your credit file as a database of all the raw information, and your credit report as an organized presentation of that data. Instead of having consumers and lenders trying to make sense out of the overwhelming jumble of words and numbers in a credit file, the credit report comes in the form of an easily readable breakdown including:
Keep in mind that your credit score is associated with your credit report and not your credit file. This means your credit score could potentially change for the better or worse each time your request a new credit report.
The burning question that everyone wants to know — how long is that unpaid credit card bill going to stay on my credit report? It’s the negative listings such as bankruptcies and overdue accounts that’ll linger and affect your ability to borrow.
|Type of listing||Length of time|
|Late payments||Up to 7 years|
|Credit inquiries||1-2 years|
|Foreclosure||Up to 7 years|
|Collection accounts||Up to 7 years (plus 180 days from the delinquency date)|
|Court judgement||Up to 7 years depending on the state|
|Bankruptcy||Up to 10 years (Chapter 13 may be removed after 7 years)|
|Accounts listed as charge-offs||Up to 7 years|
A thin credit file is essentially a lack of reported information regarding your credit accounts. A thin credit file is a signal that:
It’s uncommon, but a split credit file is when credit bureaus have too much information on an individual and deliver the credit file fragmented in multiple files, resulting in a thin credit history. This credit reporting error could be due to higher than usual account activity, repeated changes in name or address or too many inquiries.
A split file can be fixed by comparing the information side by side from all three bureaus, identifying which bureau is misreporting your credit information and then contacting the bureau with the split file to request the files be merged.
Don’t stress, everyone has started off with a thin credit file at one point or another.
There are several different ways to plump up your thin credit file, however, it takes a few weeks to report your credit activity and a minimum of six months to compute a credit score.
Here are some common solutions used to make an invisible credit file appear healthy to the credit bureaus:
Your credit file is going to be peered upon by a bunch of eyes, and you should stay on top of it to make sure that it’s correct and not too thin so you can maintain a healthy credit score.
A lack of credit doesn’t mean you have to ditch using cash, but opening a line or two of credit now (that’s managed responsibly) can only help prove your creditworthiness when you’re applying for a financial product in the future.
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