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What's in a Report?
Bureaus keep records on consumer accounts for 7 years and
on bankruptcies and other legal claims for 10 years. Most
contain some form of the following: Open Accounts,
Closed Accounts, Derogatory information, inquiries and a
credit score. Residential and employment history is
usually included as well.
The balances on open accounts is used to determine the monthly
total of how much you pay on your bills. Your qualifying
ratios are then determined from this. You may find
an open account that you haven't used in years or even
forgot about. Be aware that underwriters will compare
the information you disclosed on your application to see
if it corresponds to the data provided by the credit reporting
bureau. Do not leave off any account with a balance
on your application.
Closed accounts are not important.
Derogatory information may include: late payments,
foreclosure notices on a mortgage, vehicle repossessions,
bankruptcies, collection accounts, judgments and tax liens. Although
having any of these items on your credit report may not keep
you from getting a home loan, at the very least they will
affect your credit score and make your loan more costly in
the form of a higher interest rate. A combination of
enough of them and it will keep you from obtaining a home
loan.
Also shown are the number of credit inquiries made in the
past 18 to 24 months. Businesses that examine your credit
are required by law to have a "legitimate permissible
business need." This prevents just anyone from
having access to your credit file. Any company that receives
a copy of your credit file will show up under the "Inquiry" section
of your report. "Promotional" inquiries,
such as credit card companies who may be sending you a pre-approved
credit card application will show as promotional because
they are only accessing your name and address, not your credit
history information. A large number of inquiries in the months
previous to you applying for a home loan can be detrimental,
even if credit was not ultimately received from the companies
making the inquiry. It shows interest in making credit
purchases and is a red flag to loan underwriters.
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