You know that your credit score is based on information in your credit history. However, few people wonder how it gets there. The answer is relatively simple: Your creditors report information about you to the credit bureaus. When you pay on time, or if you are late, your lenders report that information. Your entire credit history and credit report depends on how creditors and others report to the credit bureaus, and that information can impact the way your financial reputation looks on paper. Here are a few areas to watch out for.
Late Payments
One of the biggest determinants of your credit score is whether or not you make on time payments. If you are generally a good borrower, and pay on time, but miss the due date by a couple of days one time, your creditor may decide not to report it as a late payment. Some creditors won’t report you as late until after the payment is 30 days late.
While this is nice, there are some creditors that will report a payment as late the day after — no matter how good a customer you are — and negatively impact your credit score. It is important to get a feel for the way creditors report late payments so that you know what to expect. Of course, it’s best to make sure payments are on time, and avoid the problem altogether.
Editor’s Note: Beware about credit card payments. The credit card companies are required to report your payment dates to the credit bureau. If it’s late, it’s late, even if it’s just one day. If you care about your credit score, then make sure your payments are on time without exception!
Non-Credit Payment Delinquencies
While creditors will report that your account is paid on time, others to whom you have obligations won’t. This includes utilities, cell phone providers and other service providers. You won’t get any good marks for making these payments on time, but these non-credit obligations can affect your credit score if you don’t pay. Your landlord, utility company or any other provider can report your delinquency to the major credit bureaus, even though they aren’t lending you money. Most will wait at least 60 days to report you, but some may report a missed payment sooner. This is a good reminder that negative decisions you make with regard to money can find its way to your credit history, even if you aren’t borrowing money.
Credit Report Mistakes
With millions of records being report constantly, there are bound to be mistakes here and there. Sometimes, a creditor will report an account as closed by the company, rather than by the customer (which is a slightly more negative situation), even though the customer made the request. In some cases, as happened with one of my husband’s student loans, a credit item can be reported twice, making it look like you have more debt than you actually do. And, of course, there are other mistakes that find their way on to a credit report too.
When you find mistakes in your credit history, you need to contact the creditor in order to get the problem fixed. While you can send copies of your documentation to the credit bureaus that have the mistake, it is up to the company that reported the information incorrectly to carry through with getting the problem fixed. You should write a letter to the creditor, explaining the situation, and including copies of supporting documents. Keep copies for yourself, and send the information by certified mail, so you know when it arrives. A creditor has 30 days to investigate and fix the problem if an error occurred. Be sure to follow up after 30 days to make sure the mistake is corrected.
You have to be careful of what is on your credit report, and remember that the information in there is only as good as what others report about you.
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{ 3 comments… read them below or add one }
Great post. Sometimes as consumers, it’s hard for us to understand how exactly a credit report works and how the information gets there. And yes, it is absolutely important to fix credit report mistakes ASAP.
We relocated to California from Israel 11 years ago. I remember how difficult it was to manage at first in terms of getting credit – we had no US credit history. Even something as straightforward as getting a mobile phone was difficult. We got credit cards with very low limits (I think the first was $500 a month). As we slowly built our credit history, we saw a gradual increase in lenders’ willingness to extend credit to us and to give us loans.
Like Vered, I had no US credit history when I first came to the US. I had to put down a deposit for everything, like cell phones, and utilities. I couldn’t even get a credit card, but the bank luckily offered a secured card option, where I prepay a set amount which becomes the limit.
It was a slow process but I eventually built up my credit history (aka credit report). All lenders care is what’s on the report. If there are any mistakes, you are most likely the one that will be hurt so take the time to fix it immediately.