- What Is A Late
credit lines requiring periodic payment, such as department
store cards, auto loans, mortgages, and credit cards, a
late payment is recorded when payment is received after
the due-date grace period. If there is any history of late
payment or non-payment, the entry will generally be considered
What Is "Bad"
There are degrees
of "bad" credit. Deliberate non-payment of all your
accounts with an unknown change of address is the worst. You
are then considered to have "skipped". Bankruptcy
is next. Then comes varying degrees of a late-payment history.
Contrary to what some say, one late-payment account among,
say, ten good ones is not considered "bad" in itself.
The assumption will be that the late-payment account entails
more than meets the eye - disputes, misapplication, etc.
What Is A Collection?
When an account
is referred to collections because of delinquency or because
of a bad check, this appears on the credit report as a collection
account. Collection accounts can appear as paid or unpaid
accounts. Any type of collection account, whether paid or
not, is considered very negative by all credit grantors.
What are Court Records?
Court records are
included in credit reports when they are negative. This includes
bankruptcies, judgments, liens, divorce, satisfied judgments,
and satisfied liens.
Who Determines If I Will
A credit manager.
This person, charged with granting or denying credit,
looks at your credit report and decides whether to extend
credit to you. Like all managers, credit managers all have
their own procedures, agendas and theories.Some will disqualify
you on one bad account. Others will see this one bad account
as an aberration, and will grant credit. Go figure! In most
cases, creditworthiness is an abstract. For example, most
bankrupts have had extensive credit prior to their declaration
If I Pay Off A Delinquent
Account, Will It Help My Credit?
For the most part,
yes! It is better to pay off a delinquent account than not.
The fact that you owe no money on an account, even if it was
once delinquent, will not be considered unfavorable by some
lenders. However, remember that most negative information
can remain on your credit report for seven years from the
date of last activity on an account. So, even if you repay
a delinquent debt, the fact remains that the debt was unpaid
for some time. In that sense, the unpaid debt it can appear
as a negative entry for seven years from the time you repay
it. The reality is, however, that the particular entry will
be removed within a year.
What If I Had Late Payments
Several Years Ago, But Not Now?
For most of us,
life is a series of up and down cycles. Lost jobs, divorces,
illnesses, medical expenses, business failures, etc., sometimes
make it difficult to make ends meet. The fact that circumstances
hindered your ability to pay in the past does not make you
a deadbeat. If you have had a good payment record for the
most recent two, or more, years, you will probably be alright.
In fact, some lending institutions consider only your recent
Is Some Credit Easier To
Get Than Others?
There are, basically, two types of loans - secured and unsecured.
Secured loans are collateralized by something of value. Real
estate and automobiles are the most common collateralized
purchases. Depending on the down-payment, the risk of complete
loss of capital is minimal to non-existent. What will be affected
by poor credit is the size of the down-payment required. Conversely,
unsecured loans, like credit cards, are usually unsecured
and the complete loss of capital is very possible. With this
type of loan, credit grantors tend to look for pretty good
credit. Therefore, in most cases, it is easier to buy a house
than to get an American Express card!
If I Have Very Bad Credit,
Will I Be Denied All Credit?
Probably not by
everyone! If you are recently homeless and without income,
most certainly you will be denied credit. However, if you
are employed, someone will take a chance on you! There are
cottage industries which make a living off people in trouble.
Keep in mind that bankrupts can get credit cards! They get
them because some credit manager believes 1) that very few
declare bankruptcy twice and 2) the bankrupt doesn't owe any
money! And, also, if you have had a good credit rating in
the not-too-distant-past, your chances are good!
What Is Predictive Scoring?
The credit bureaus
have developed models that predict future bankruptcy, delinquency
and the like (DAS, Beacon, etc.). These scores are used by
credit managers and banks to help them decide how creditworthy
you are. If the score is in the lower quartile, you will probably
be denied the credit you seek. You will never hear, however,
that you were declined for that reason. These scores are educated
guesses and, as such, constitute no rational or defensible
reason, in the law's eyes, to deny credit.
What Is An Inquiry?
Every time a potential
credit grantor orders your credit report, that inquiry is
noted with an entry in your credit file listing the entity
that requested the report and the date thereof. This does
not affect most credit applicants. Only when the number of
inquiries becomes excessive do credit managers take a dim
view of them.
Can I See My Credit Report?
Not unless you
order it yourself. Believe it or not, credit grantors, landlords
and others are not allowed to show you your own credit report!
If a credit grantor takes some adverse action based on information
in your credit report, they must tell you from which credit
bureau they received the information.
Who Will Request My Credit
Of course, those
to whom you apply for credit will definitely order one or
more of your credit reports. Since renting an apartment or
house is a form of credit extension by the landlord, the landlord
and/or the real estate agent will want to see what your credit
looks like. Others who will want to see your credit report
include prospective employers, insurance companies, prospective
business partners, investment companies and, should you not
pay your debt, collectors.