What Is a Credit Report

When we go to school, we learn how to read, write history, biology, math, etc. However, they do not teach us about credit. We end up in college, and we get into debt using student loans.

We finally finish, we graduate, we go live in the real world. Now is payback time. You got that right, the minute you graduate from college, the clock starts ticking, and before you know it, you are receiving those student loan bills for all that money that you borrowed that make you realize that it will take you a lifetime to pay off.

The bad part about it is that in order for you to start paying it back, you need a job, and most of the time, as we all know most of the college graduates end up taking up any job to support themselves while they land their dream job. Sad, isn't it?.

This is when you realize you can't afford to pay back your student loans. Not just yet. You ignore your bills and pretend like they will eventually go away some day.

A few years down the line you strike your dream job, then you go after the American dream; the family, the kids, the house, the cars, and oh, let's not forget the puppy. You start doing your research. You start looking for houses.

Once you find the house you like, you apply for a loan and boom! There it is, you can’t get approved, you have bad credit, and you don’t even know why. You start asking questions, you find out your student loans are reported as delinquent accounts. You also find out you have medical bills from that one time you went to the hospital, and they’re all reported as “Collection accounts.” You also discover that first credit card you got approved for when you were 18 years old is also reported as a negative account for non-payment, and not only is this card reported as a charged of negative account on your credit report, it was also sold to a collection agency who is also reporting it, making it one negative account, now two negative accounts on your credit, and since there are three credit reporting agencies, that one negative account has become six negative accounts on your credit report.

You ask yourself how did you let this happen to you, and for a long time your dreams become blurry, and you can no longer buy your dream house, you can’t get approved to finance that new vehicle you want, you are left with three options:

1. You start paying off that debt reported on your credit, which can take you many years.
2. You contact a credit repair agency to assist you on cleaning up your credit.
3. You file for bankruptcy.

The sad part about any of these options is that no matter which one you choose, none will grant you the freedom of buying that dream house any time soon. Think about this: if you start paying off your debt, this can take you years, and even after you’ve finished paying it off, your credit report will still affect you for years to come, since all those negative accounts will be reported as “Paid after being in collections.” This can potentially affect your financial decisions, because lenders will see this and will use this against you to not approve you for any future loans, and if they do get you approved, they will be charging you very high interest rates.

If you decide to go for option number two, and you hire the services of a credit repair agency, the majority of those companies don’t know what they’re doing, they take you for a ride while charging you monthly fees. If you get yourself a good reputable credit repair agency that actually works on your credit, and knows how to remove old debt from your credit, this will cost you as well, and it can also take a few years to be done.

If you go for option number three, and you file for bankruptcy, now you will not get approved to buy a house, because you just went to court and told a judge that you’re officially broke. This will be reported on your credit report, and it will stay reported for up to ten years. Eventually no bank will ever risk to lend you their money to buy a house, because your credit report now says you’re officially broke.

So as you can see, there is no easy way out. There is no magic eraser to erase your past in 24 hours. You realize that all your dreams are shattered, and start feeling guilty over something you had absolutely no knowledge of. You realize that you went to school for years and years, and absolutely no one ever talked to you about having good credit. Here you are now stuck with your beautiful family, with no hopes of ever giving them a place called home any time soon, you will be stuck renting for years to come, and we all know when we rent someone else’s place we are actually paying off their mortgage. And how sad is that?.

You feel trapped, you start having marital problems, you are stuck for years, and unless you buy a house under someone else’s name, your future looks dim. And nowadays it's very difficult to find one person that will let you use their name to buy anything. People with really good credit usually went through your same situation before they were able to build their own credit, and not everyone is willing to take a chance with you. What if you can’t pay your house? Who’s credit will be affected? What if you lose your job or get sick and can’t work to pay off your house? You will shatter someone else’s dreams, and drag them down with you, and there goes their credit as well.

A credit report is just like a school report card. Your teacher will grade you based on your knowledge. They have a grading system from A to F. Based on how much you paid attention throughout the year in school, and how well you did with homework your report card will show A, B, C, D, E and F. We all know what those letters mean.

The same thing happens with your credit report. It is simply a report card where lenders go to report all your financial behaviors where two main teachers called “Fico Score and Vantage scores” will analyze your payment behavior, and will grade you from 1 to 900. based on how good or bad you are as a payer. The lower your credit score, the worse your credit report. The higher your credit score, the better the chances of getting approved for a loan. And this is what they never taught you in school. They never told you how important it is to start building good credit, how important it is to pay back on time any credit cards or loans you got approved for, your student loans, your medical bills, your car loans, etc.

A credit report is like a report card that shows how you behaved with paying back your debt. If you pay on time, your lenders will report to the credit bureau “Pays on time.” If you pay your bills late, they will get reported just like that “Pays late.” If you stop paying, guess what? Yes, you got that right, they will report it as “stopped paying, charged off.” If you pay after the account has been sold to a collection agency this is exactly what your credit report will show, “Paid after being in collections” the better you are at paying your bills, your loans, the higher your credit score. The higher your credit score, the better the chances of getting approved for any future loans and credit cards.

I truly hope all this information serves you well. And if you need credit repair services, make sure you read the company’s reviews before hiring anyone. Make sure you do not hire a company that charges you a monthly fee. Those companies will not work on your credit as fast as they should, and the reason for this is because they want to keep you making that monthly payment for as long as they can. Think about this, those companies trick let’s say one thousand people to pay let’s say $29.99 a month to fix their credit. Do the math: 29.99 X 1,000.00 = $29,990.00 a month is their revenue. Do you honestly think they are interested in cleaning your credit any time soon? I’m sure you answered this question. I hope this information also helps you educate your children about building good credit. This is when “School starts at home” applies. And if you don’t teach your children about credit, you already found out the hard way that they will not learn this in school, and you can save them tons of future headaches by being their personal credit advisors. Let’s educate ourselves so that we can educate our children, and prevent them from making the mistakes we made.

Written by:

Jeannette Perez

Credit repair specialist