Your credit report contains records of your current and past personal information, credit cards, loans and credit inquiries. Lenders take all of your credit information into consideration when considering any applications that you make for new credit. There are different types of credit information on your report.
Revolving Debts
Revolving debts are debts, which are subject to change, and as such, your regular repayment amount will also change. A revolving debt will report on your credit file indefinitely until the account is closed, after which it will report for up to 10 years. Credit cards and lines of credit are revolving debts.
Installment Debts
Installment debts have a set monthly payment amount and payoff date. Mortgages, student loans and vehicle loans are all classified as installment debts. Having installment accounts appear within your credit file along with revolving debts demonstrates a balanced financial profile and will increase your credit score.
Derogatory Accounts
Derogatory accounts are debts that have been sent to collections due to nonpayment. A collection agency will then place an entry on your credit report identifying itself as the current holder of the debt. Derogatory accounts have a negative effect on your credit score but can only appear for 7 years before being removed.
Credit Inquiries
Whenever a lender pulls your credit report, a credit inquiry will appear within your credit file. Credit inquiries have a slight negative effect on your score, thus you should take care to only apply for credit you are reasonably sure you will qualify for. When you pull your own credit report, however, your score remains unaffected.
Considerations
You can request a free copy of your credit report once each year to review it for inaccuracies at AnnualCreditReport.com. Should you find mistakes in your report, you can dispute the errors with the credit bureaus either by mail, telephone or online.
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