How to Understand Your Bad Credit Report

Many things can contribute to a bad credit report. Bad credit can remain on your credit report for seven years. Each item of bad credit has a certain designation for identification purposes. Items of bad credit can include bankruptcy, repossession, foreclosure, 30, 60 and 90 days past due, judgments and tax liens. After seven years, most bad credit items will automatically fall from your credit report. You can dispute any inaccurate or incomplete information.

Instructions

1

Determine which items on your credit report are charge offs. An account is reported as a charge off or loss when there has not been a payment in six months. Charged off accounts are assigned a credit rating of "9" on a credit report. The "9" can be preceded by an "I" for installment loan or an "R" for revolving account such as a credit card.

2

Locate and review your credit ratings. When an account is late by 30 days, it shows up on your credit file. If a payment is not made the next month, it becomes 60 days late. An R-1 or I-1 means that the account is paid on time. An R-2 means the account is 60 days past due; R-3 accounts are past due 60 days; an R-4 account is 90 days past due.

3

Take a look at trade lines. The information reported to credit reporting agencies are called trade lines. The information listed includes the name of the creditor, balance, date last paid, type of account and the credit limit. The credit rating appears at the end of the account to the far right.

4

Find your credit score. Once you establish credit, you are assigned a credit score. Credit scores can range from 300 to 850. The higher your credit score, the better terms and conditions you receive on credit products such as mortgage loans, lines of credit, auto loans and credit cards.

5

Review the effect bad credit has on your credit report. A foreclosure can reduce a credit score of 680 by 85 to 105 points; a score of 780 can be reduced by 140 to 160 points. Bankruptcies can reduce a score of 680 by 130 to 150 points and a score of 780 can be reduced by 220 to 240 points according to the website Credit Cards.