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As time goes on, consumers are becoming more and more aware of the importance of both their credit report and their FICO 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 ratings 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 FICO score offers a quick summary of a potential borrower’s monetary health, it is the report that offers all of the details that lenders want to see. Previous debts, installment loans and mortgages are listed there, in addition to bankruptcies, tax liens and more. If you have a bank card, it is listed. If you had a car loan that you paid off five years ago, it is listed, and the report will note whether you paid punctually and fully.
Positive entries on your report will include paid debts, open credit accounts in great standing and closed accounts. Contrary to popular belief, positive entries do not appear on your credit profile 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 bank card debt. These are “red flags” that have a tendency to catch the attention of lenders rather quickly. If you have quite a few negative entries and a so-so credit score, you may find it tough to obtain additional credit. On the positive side, negative entries disappear from your credit profile after seven years, with the exception of Chapter 13 bankruptcy filings, which stay for a full ten years.
The key to a healthy credit score is usually repaying your bills completely and promptly. Prompt payment of your bills when they are due will also assist you maintain a healthy fico score. If you have negative entries, they will fade away in time, but great entries from open charge card accounts can stay indefinitely. For that reason, you should do your ideal to repay your bills promptly in order to continue to keep your credit history in tip-top shape.
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