Can a Creditor Only Report Negative Information on My Credit Report?

Taking a closer look at your credit score is associated with an increase in creditworthiness, according to the Consumer Federation of America. Credit reports show you everything about your financial history, such as when you missed payments or how many loans you have open. Although negative information can have a major impact on a credit score, it is not the only thing reflected on it.

Identification

Technically, a creditor could only report negative information about an account, because the credit rating agencies require input from lenders who are free to report as much or as little as they want. Most lenders, however, will report positive information, because accuracy is highly desired in the credit industry and as a courtesy to customers.

Other Information a Creditor Reports

Creditors can report almost any information you put on an application. Credit reports show demographic data, such as last known address and employer, and any type of public record or judgment, such as a tax lien, according to the Privacy Rights Clearinghouse. Lenders can report salary information, but the credit rating bureaus choose not report this out of concerns about accuracy.

Effect

Once a creditor reports a negative item to the credit bureaus, it stays on the consumer's report for seven years. The most derogatory items are those that show a person cannot pay a debt at all, such as bankruptcy, foreclosure and a collections account. State law may require certain negative items to stay for a lesser amount of time.

Mistakes

Mistakes can happen, with lenders or with the credit rating agencies, such as when an account is posted to the wrong report. Consumers should scan their reports frequently for errors. If you find one, dispute it with the credit bureaus---who must verify the error with the lender in 30 days or take it off the report. Negative items identified as errors are removed from the record and you receive a free copy of your credit report.

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Effects of Unemployment on a Credit Score

There are no direct effects of unemployment on your credit score. However, the loss of income might affect your credit score. For example, if you have more bills than you have money while you are unemployed, this can certainly cause you to get behind in your payments, which will in turn affect your credit score.

Late Payments

When you are unemployed, you may be receiving unemployment benefits, which might not be enough to cover your bills. You may end up making late payments, which can affect your credit score negatively.

Fees

Should you make late payments or go over your credit limit as a result of unemployment, then you may be assessed late fees. This will only increase your debt load and the amount of the next payment, which can negatively impact your credit score.

Higher Interest Rates

When unemployment forces you to make late payments or go over your credit limit, then your creditors may impose higher interest rates because you defaulted on the original agreement. Your credit rate will suffer if you can't keep up with the payments as a result of the higher interest rates.

Foreclosure

If unemployment causes the bank to foreclose on your home, then this will cause your credit score to drop dramatically. A foreclosure will remain on your credit report for seven years.

Bankruptcy

If unemployment causes you to file for bankruptcy, this will negatively impact your credit for up to 10 years.

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How to Delete Things From Your Credit Report

Credit scores have become increasingly important in just about every area of a consumer's life. Credit scores, and the reports used to generate the numbers, are used for auto loans, home mortgages, health insurance premiums and even potential employment evaluations. A negative item on your report can make a huge difference in your life. You can take a number of steps to delete disputed items from your report.

Get Your Reports

Get your credit reports from all three of the credit bureaus so you can delete negative items off all your records. The three agencies are Experian, TransUnion and Equifax. You are entitled to a free credit report by law via AnnualCreditReport.com. If you know you have an item to dispute, you can also get free reports from any of the bureaus. Simply go to each bureau's website and follow the links to dispute an item. You will be shown your full credit report so you can request any disputes.

Dispute Items in Error

If there is an item on any of your reports that is a legitimate error, you should dispute it immediately with all three bureaus. Each one has a dispute process that you can do online, by mail or on the phone. To get an item removed, you will need to provide a reason or proof that it has been reported in error. Legitimate reasons include the fact that it is not your account, it has been paid in full prior to going to collections and it is an invalid debt.

If you are disputing an item that you simply believe you should not be responsible for paying, you should dispute the item by mail and provide evidence documenting the claim. The Federal Trade Commission provides a guide for consumers to help with disputes.

Contact the Creditor

Contact information for the creditor reporting each negative item should be included on your report. Call the number to inquire about the item. If it is a credit card company, bank or other established institution, it should have a process for determining the validity of the item. Provide written documentation. If it is a collection agency, it is likely to be less willing to remove the item. Send a formal letter to the collections company along with any proof you have that you are not responsible for the debt. ExpertLaw provides sample letters as well an explanation of your rights under the Fair Debt Collections Practice Act. If you are at all unsure what to include in the letter, consult a reputable attorney who specializes in collections.

Offer to Pay Debt

Some collections agencies are willing to remove the reporting of a negative item if you agree to pay the debt in full. Call the collections company and request a "pay for delete" letter mailed or emailed to you, but do not claim responsibility for the debt. You should keep a record of the letter and check your credit report again in 30 days. If the item has not been removed, you can dispute the item with the credit bureaus and send them a copy of the letter.

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Can Being Added to Someone Else's Credit Card Improve My Credit?

Your parents have good credit. You, not so much. You may wonder if you could improve your credit by having one or both of your parents add you to their credit cards. Under the most recent credit scoring models, gaining access to someone else's credit card account may not boost your credit score much, if at all, even if the other person maintains excellent credit.

Equal Credit Opportunity Act of 1974 and Regulation B

Under the Equal Credit Opportunity Act of 1974 and Regulation B of the Federal Reserve Board, lenders and credit granters must consider accounts held and administered by both spouses when considering the creditworthiness of a married person's credit. As a result of Regulation B, Fair Isaac Corp. also includes accounts where an individual is listed as an authorized user in calculating the credit score of that user.

Authorized Users and Piggybacking

Primary credit card holders are permitted to add one or more authorized users, usually family members, to their account without an additional credit check for either party. The authorized user enjoys the same access to a credit card account as the primary card holder and also receives a credit card. However, in so-called piggyback operations, a commercial company adds the individual as an authorized user to the credit card account of a complete stranger with excellent credit who receives a fee. The authorized user pays a hefty fee for the credit boost, but never receives a credit card, according to Bankrate.

FICO 08

In reaction to the broad popularity of piggyback schemes, Fair Isaac Corp. proposed a new algorithm in 2007 that would exclude authorized user accounts from the calculation of credit scores. However, Fair Isaac conceded before a Congressional subcommittee that the proposed change would violate Proposition B and abandoned the plan. FICO 08, Fair Isaac's most recent credit scoring algorithm, continues to factor authorized credit accounts in an individual's credit score. However, Fair Isaac Corp. claims that the revised algorithm will diminish the credit boost from piggyback schemes without punishing so-called legitimate authorized users such as spouses and offspring, according to Reuters, quoting an industry press release.

Credit Bureau Reporting

If you are not the spouse of the primary credit card holder, the company may or may not report your status as an authorized credit card holder to credit reporting bureaus. In addition, VantageScore, an alternative credit scoring agency created jointly by Equifax, Experian and TransUnion, the three major credit bureaus, does not include authorized credit accounts in its scoring model. The agency claims that it is in compliance with Regulation B because it draws its data from credit bureau reports, which do not indicate whether an authorized account is a spousal account, Bankrate states.

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How Do Collections Affect a Credit Score?

Your credit score is affected by many things, including the way you handle your finances, obtain and use credit and make payments on your accounts. You may have an account go into collections if you skip several payments. This pulls your credit score down and leaves you open to other negative consequences.

Definition

Your credit score is a three-digit number derived from a compilation of financial information. Companies like FICO, the top credit score provider, use data from your credit reports to calculate the number. FICO explains that 35 percent of your score is based on how well you repay your accounts, 30 percent is based on your total owed debt, 15 percent is based on the length of time you've had credit, 10 percent is based on your mix of different account types and 10 percent is based on how many new accounts you've opened. Collections accounts fall under your payment history, which has the largest effect.

Credit Score Effects

If you skip several months of payments on a credit card, loan or other account, the creditor will most likely send the matter to its collections department. This hurts your credit score because of the delinquent payments and the creditor's action. Other lenders will view you as a poor credit risk because you now have a history of not paying your bills. You will pay a high-interest premium on new accounts or you won't be able to open them at all because your poor credit score will peg you as a high-risk customer.

Other Effects

Collections can affect you beyond hurting your credit score. Collection departments can be aggressive, bombarding you with phone calls and letters demanding payment. The lender may decide to sue you and get a judgment against you for the debt. Depending on your state of residence, the lender may be able to place a lien on your property or garnish your wages. The lender might opt to sell the account to an independent collection agency which may add fees that boost the total due.

Prevention/Solution

You may be able to prevent creditors from sending your account into collections by contacting them as soon as you know you will have payment problems. Explain the situation and ask about potential solutions like reducing the monthly payment or changing the due date. Some lenders will refuse to work with you, but others may be open to assisting rather than having you potentially default on the debt.

Warning

You may hurt your credit score even more by paying off a collections account, Liz Pulliam Weston of MSN Money warns. A paid collection is still a negative item, and it looks even worse if you negotiate with the lender or collection agency and settle for a discounted amount. You will restart the statute of limitations on an old debt if you acknowledge it and make payment arrangements. Ask the creditor or collection agency for an agreement to report the debt as "paid as agreed" in exchange for paying it off. Insist on written confirmation before handing over any money so you can force the company to follow through, Melanie Sullivan of the Military Money website advises. This change will erase the effect on your credit report since there will be no evidence the account was ever in collections.

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Could My Ex-Wife Use My Credit?

Your ex-wife cannot legally apply for credit under your name, but since you probably opened a few accounts with her, she might damage your credit or increase your financial obligations. Even if you have nothing to do with some charges, you could owe money due to community property laws. Thus, you may need a lawyer to sort out which expenses you and your ex jointly owe.

Identification

Your ex-wife cannot apply for credit under your name; using another person's information on a credit application is illegal and called file segregation. However, your ex-wife can use joint accounts, such as credit cards and a mortgage. When you put your name on an account with a spouse, you agreed to pay the bill even if a judge gives the bill to only one of you.

Community Property

Some states assign debt to both spouses regardless of the type accounts they hold. In a community property state, spouses jointly own any debt incurred during the marriage even if they use individual accounts. However, a judge can assign debt to one party, such as if a spouse were to sneak off to a casino and rack up thousands of dollars in gambling debt, usually called a "hold harmless" or "indemnity" clause. Although community property states stop assigning debt to both spouses after a judge signs the divorce papers to end the marriage, community property might extend to your assets long after your marriage, such as contributions to your 401(k) retirement plan during the marriage.

Preparation for Divorce

Experian recommends monitoring your credit during the divorce to know which accounts creditors say you must pay. You must pay joint accounts even when you dispute the validity of a debt or include them in a divorce proceeding. Missing payments damages both of your credit histories. If you anticipate a divorce, try to settle accounts before an argument arises. You might not be able to remove your spouse from some accounts, such as a mortgage, unless you refinance, or pay off the loan with a new contract, and the spouse agrees to selling the property.

Tip

You should consult a divorce attorney to help you figure out which charges were made by your ex-wife. You might need to ask a judge to order your ex-wife to furnish credit card statements so you can determine which charges were made after the judge signed the divorce papers. You also can ask the judge to reaffirm that you do not have to pay debt which your ex incurred after the judge signed the divorce decree.

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How to Interpret Credit Score

Credit scores are often used by loan companies, banks, and other credit card companies to determine if you qualify for a loan, credit card or mortgage. They can also be used as a guideline for yourself to determine how carefully you should spend in the future. To understand credit scores, you'll need to understand what most commonly determines a credit score, and what a good one is.

Instructions

1

Understand where the credit score comes from. Generally, credit scores are calculated by looking at your payment history, current debt, credit history, how much new credit you've applied for recently, and some other minor factors such as the variety of debt you have.

2

Determine whether or not your credit score is good. The most common credit score scale is the FICO scale. This scale ranges from 300 to 850. A good credit score is close to or more than 650.

3

Determine what this score means. A credit report will generally break down the individual categories behind a credit score. If you have a bad credit score, this means you have a number of negative factors affecting your credit score. Negative factors include: A lot of outstanding debt, a lot of recent credit checks, and a lot of late payments.

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