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The truth about your credit report

Most Houston residents likely know that they have a credit report, which is dedicated to chronicling their financial activity. Lenders can use this report to investigate if an individual is a worthy candidate to lend money to.

However, few people truly understand what goes on their credit report and what purpose it serves. This could lead people to worry about things like filing for bankruptcy, fearing that it will decimate what would otherwise be a sparkling financial report. Before you fret over your credit report, start by learning the truth behind it.

For instance, many people think that your credit report contains your credit score. This is not necessarily the case. Your credit report will have a score on it, but beware, this is not necessarily the score that potential lenders will be looking at when they make their decision. The most widely-used credit score is called a FICO score. Consumers can obtain their FICO scores through, but it costs money to access. Credit reports are normally free to access.

Others fear checking their credit report frequently because they think each time they check, it's a strike against them. Viewing your credit report has no bearing on your credit standing at all. In fact, experts would encourage you to check your credit report from time to time, even if you are current on all your debt. This is simply to make sure everything is up to date and accurate.

It only negatively affects your credit report if you give a potential lender permission to access a copy of the credit report. This transaction is called a hard inquiry.

Paying off delinquent debt is not going to magically scrub if off your credit report right away. In fact, a missed payment stays on your credit report for up to seven years. A Chapter 7 bankruptcy stays on for 10 years, making bankruptcy the more logical choice in some scenarios.

Source: Fox Business, "The Truth About 7 Common Credit Report Myths," Kelly Dilworth, April 18, 2012

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