If you are under debt and now want to ensure that you are able to handle your finances properly, start with a review of your credit report. This will help in giving you a clearer picture of your current financial status.
How Debts Affect Your Credit Report There is no doubt about how much debts can affect your credit score. Quite simply, going into debt, particularly unmanaged ones can bring down your credit score and leave a negative impact on your credit report. But getting rid of debts is not a task that can be accomplished overnight; it requires time and proper management. And while your scores are pulled down because of debt, managing your finances responsibly and honestly can boost actually work towards improving your credit records. If you are under debt and now want to ensure that you are able to handle your finances properly, start with a review of your credit report. This will help in giving you a clearer picture of your current financial status. Debts affecting your credit report You can request for a copy of your free credit report from the reputable credit agencies—Equifax, TransUnion and Experian. You are entitled to get a free copy of your financial documents annually. Your financial documents will document your entire credit history. And while it doesn’t reveal your financial assets, it does summarize and detail your payment habits, which then becomes the basis of your credit score. Lenders determine your credibility by virtue of your scores and this is where major purchases such as taking out a mortgage for a house, or a loan for a car or even as simple as insurance are based on. Your credit report basically is used as a main reference to ensure that a person is financially capable to repay loans. You can find the rules of reporting of debts in the Fair Credit Reporting Act, or FCRA. According the law, most negative items are removed from your credit file after seven years from the first date of delinquency. But there are exceptions to the seven-year rule, which include bankruptcy filings, which are reflected in the statement for 10 years. Paying debts on time is the only remedy Debts do not go away entirely due to FCRA rules, which mandate that debts be recorded for a certain amount of time. On top of this, collection companies can collect debts past its due date. Numerous debts therefore can really take away from your credit score and reflect negatively on your credit report. The best solution is to pay the amount or at least pay for the agreed minimum amount, which can improve your credit report. You can even try to negotiate with the collection agency to allow for more manageable terms.
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