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Advice Team Responses
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Credit Reporting: General |
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More Advice Team |
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How familiar are you with credit histories following people who move
internationally?
Cheers! -Michel |
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Michel,
It is my understanding that any company outside of the US would have to have a subscriber number in order to submit information to any of the three major US credit bureaus. I checked an industry contact who indicated that he has never seen an out of country subscriber on a credit bureau.
Hope this helps,
The Advice Team |
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I am constantly being told by creditors that I was turned down because I have "too much revolving credit." What does this mean? I have never declared bankruptcy or had any writeoffs. The creditors also mention something about debt-to-income ratio. -Steve
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Steve,
Your debt-to-income ratio is the percentage of your gross monthly income that you have going towards debt payments.
While different lenders will have different criteria, in general, your mortgage payment, plus your ongoing debt (credit card payments, car payments, student loans, child support and so forth,) should be no more than 41 percent of your gross income, or you are getting into expensive trouble. For example: gross monthly income of $2,000 multiplied by 41 percent equals $820.
The Advice Team |
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I am in the military stationed overseas. I have the potential to be debt free now. But am curious if being debt free for a few years will look negatively on my credit rating when I return to the US to buy a home? I have $20,000 in savings and a car loan of $15,000. Thats all to my debt. I have a $10,000 credit card limit with nothing on it. My concern is, if I pay off my auto loan and have no debt for two years, will my credit rating be higher or lower than if I have some debt that I pay regularly?
-Dan |
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Dan,
That is a good question. It is true that having little or no credit history can affect your credit score. "Credit scoring" refers to a statistical method used to assess how good a credit risk you are. The credit bureau gathers their statistics from your creditors. Aspects of your credit file such as your payment history, amount owed, length of credit history, any new credit and the type of credit accounts you have all have certain point values. The number of times you apply for credit and the frequency of these attempts to get credit are also taken into consideration. If this information is not available to potential creditors, they may not have enough information necessary to grant a loan. If I were you, I would keep my current card active and use it wisely.
Thanks for writing and good luck,
The Advice Team |
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I have read your entries and learned that negative information remains on a credit report for seven years. When does the seven years start? Is it the date the account went delinquent, the date the item was reported to the bureaus or the date the item is repaid? -Rebecca |
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Rebecca,
Pertaining to the seven year time frame, let me quote directly from the federal "Fair Credit Reporting Act" (FCRA) exactly how long a delinquent account can remain on a consumer's credit bureau file. Section 605, 1681,(c) states, "The seven year period, shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjection to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately proceeded the collection activity, charged to profit and loss, or similar action." This section basically states the seven year time frame starts 180 days after the account becomes delinquent.
The Advice Team |
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I understand about credit repair, but if a credit card company settles, what actually shows on your report and how long and do they have recourse still yet to the unsettled amount? -Christine |
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Christine,
The creditor may report this one of three ways on your credit report:
-paid in full
-settled
-charge off
You should also know that if you settle for an amount where the creditor "writes off" $600 or more, you will most likely get a 1099 in the mail and will be required to claim this amount as income on your taxes. Also, if you want to buy a home later down the road, you will most likely be required to pay the remaining amount so that the creditor shows "paid in full" versus "settled" or "charge off." If you do then pay the remaining balance, you will then need to file an amended tax return so that they can reclaim the taxes paid on the amount originally written off.
Hope this helps!
The Advice Team |
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Is it true that bad credit is automatically erased from your credit report every seven years? -Kevin |
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Kevin,
Seven years is the general rule, however there are some factors that can affect the length. Here are some exceptions to the rule:
-If you file Chapter 7 bankruptcy, the notation will remain on your credit report for 10 years from the filing date.
-Section 605(b) of the Fair Credit Reporting Act (FCRA) provides that there is no time limit applicable to a report made in connection with credit involving a principal amount (or insurance with a face amount) of $150,000 or more.
-Unpaid student loan debt typically remains on a person's credit report for seven years after the debt is repaid.
For more information about the FCRA, visit the Federal Trade Commission’s website at www.ftc.gov.
The Advice Team |
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