Understanding Your Credit Report and Credit Score

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Lebedin Kofman LLP

New York, NY

Practice Areas

Debt Settlement, Bankruptcy, Criminal Defense, DUI and DWI, Sex Crimes, Civil Rights

A credit report is a compilation of information about the borrowing and repayment habits of a consumer. Lenders report this information to the three major credit reporting agencies, Experian, Equifax, and Transunion. These agencies use the information submitted to create a credit report. The information listed on a credit report include: (1) personal identification information; (2) payment history; (3) a list of creditors who have recently requested copies of your report; and (4) public records. The personal information listed includes your name, birthdate, social security number, recent addresses, and recent employers. Personal comments, income, medical conditions, criminal records, and payment history on non-credit accounts are not included on your credit report. Lenders, insurance companies, government agencies, landlords, and employers all have access to your credit report and score.

The amount of time that negative information stays on your credit report varies. Paid debts and judgments can stay on a credit report for five years, starting at the date the account was charged off or sent to collection. Unpaid debts and other negative information can stay on a credit report for seven years starting from the date your account was charged off or sent to collection. However, bankruptcies may stay on a report for ten years, student loan information may stay for more than seven years, and unpaid judgments may stay for up to twenty years. Positive information will never disappear from your credit report. Credit reports may contain mistakes that could potentially harm your financial well-being. According to the US Public Interest Research Group, 25% of credit reports contained serious errors and 79% of credit reports contain a mistake of some kind.

A credit score is a number assigned to a person that indicates to lenders their capacity to repay a loan. It is determined by comparing information about you with others who have a similar profile. Credit scores are usually between 300 and 850. The most common credit score formula is called the FICO score. The FICO score is developed by Fair Isaac and Company and several factors affect it including: (1) your payment history on credit accounts; (2) amounts owed; (3) length of credit history; (4) types of credit used; and (5) recent inquiries and amounts. If your FICO score is above 700, lenders generally consider you to be less of a credit risk and will offer you better credit offers. If your FICO score is below 6700, lenders tend to consider you a high credit risk and may charge you a higher rate or reject your application for credit. It is illegal for creditors to base their credit decisions on sex, age, race, color, religion, national origin, marital status, receipt of public income, or for exercising your rights under the credit laws.

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