Get The Facts: Get A Copy Of Your Report

Every time you submit an application for credit to make any purchase, you should always know what’s actually contained in your personal credit report.  Sure you may know your credit history, but do you really know if the credit bureaus are providing accurate information in your report?  Lenders obtain your credit history in the form of a report from the credit bureaus, not by asking you.  If there is inaccurate information on your report that you may not be aware of, you could be caught off guard, or worse, be denied credit!  Prior to submitting any application for credit, you should be sure that you have reviewed a recent copy of your credit report and disputed any inaccurate information. 

Some common situations in which you might be asked to discuss your credit history when you apply for credit include the following:

1. Obtain pre-approval or apply for a home mortgage
2. Purchase or lease a car
3. Submit a rental or lease application
4. Apply to private lenders for student loans
5. Submit any application for any type of an installment loan

Any time an application is submitted to a lender for these types of credits, your credit report is scrutinized.  They are using it to determine if you are a credit worthy and what type of financial risk they assume by extending you credit.   

What are the characteristics of a borrower that appears to be a bad financial risk?  One red flag that will increase the probability of denial of credit or a loan is to have an account that has been charged-off in the last two years.  Your report appears even worse if there is an outstanding balance on the account.  If that is the case, then you will probably be denied for any credit or loan. 

Another red flag is unpaid accounts that have ended up in collections.  Even though collection accounts that are unpaid do not appear as negative as do charged-off accounts, they may still cause a denial of credit.  If there is ever an inaccuracy regarding a collection on your report, then you are entitled to dispute it so that it may be removed.  This will prevent having to provide any lengthy or uncomfortable explanations to a lender. 

Lenders may also view any borrower as a bad risk that has late payments and a high credit balance to limit ratio, or credit usage.  When reviewing your own report, you should keep these factors in mind.  If they apply to you, then it is wise to bring any late payments up to date and lower your balances.  This will greatly improve your chances of being approved for credit. 

It’s always best to check that the bureaus have it recorded correctly prior to applying for credit in any of above situations.  Even in the case where you are very confident in your own credit history, they might just have it wrong.