Credit FAQ

Understanding the basics of using credit along with what comprises your creditworthiness is essential to many aspects of your financial future. Here are some answers to credit FAQ or frequently asked questions.

1. What is listed on a credit report?

A common credit FAQ regards what type of information businesses can legally list on your credit report. Your race, religion, political party, and sexual preference cannot appear on your credit history. Basically, your credit report is a list of any credit cards and loans you have taken out. The file will also feature any late or missed financial obligations, such as delinquent utility and medical bills.

1. What is an inquiry?

An inquiry is posted on your credit file every time you apply for a new account or service, whether it is wireless Internet access or a home mortgage loan. It would be irresponsible to write a credit FAQ and not warn consumers that “too many inquiries” is a reason that some creditors deny applications. Frequently applying for new accounts is considered a potential sign of financial challenges.

1. How long is all of this account and application information going to impact my life?

An inquiry remains on your credit report for two years, but usually only damages your credit score for six to 12 months from the date of the application. Late or missed payments usually damage your financial picture for seven years, unless you filed Chapter 7 bankruptcy because you could not pay your bills as promised. Chapter 7 will damage your ability to get new accounts and even some jobs for 10 years.

1. What is all this discussion about credit scores and credit ratings?

Credit scores and credit ratings are basically synonyms. To make the answer to this credit FAQ as easy to understand as possible, the higher your credit score the easier time you will have getting loans at excellent interest rates. Multiple factors impact these financial ratings, including how long you have been taking out loans and similar accounts, how many recent inquiries you have made, and how much money you owe to lenders.

1. What if I never have gotten any type of loan?

You should still check your credit reports at least once a year. Someone could have stolen your identity, or you could have a collection account that you are not even aware of. Doctors and utility companies can legally turn delinquent accounts over to collection agencies; the agencies in turn usually place the situation on your financial files for up to seven years.

Credit Score Resources