July 31st 2023.
What is a Credit Report?
Your credit report is an important record which lenders and other organizations use to assess your creditworthiness. It contains information about your current and past credit accounts, payment history, loan balances, available credit limits, and more. Three major credit bureaus—Experian, Equifax, and TransUnion—collect and compile this information.
Credit scores are based on your credit history. FICO® scores and VantageScores® are the two most commonly used scoring models. Both are three-digit numbers ranging from 300 to 850, with higher numbers indicating better credit standing.
Your credit report also includes personal identifying information including your full name, current and past addresses, and Social Security Number. Several factors influence your credit score, with payment history weighed most heavily. Other factors include the amount you owe, length of credit history, credit mix, and new credit.
FICO Score Ranges
FICO scores are the most commonly used credit scores, and they range from 800 to 850 for exceptional credit to 300 to 579 for poor credit. Very good FICO scores range from 740 to 799, good from 670 to 739, and fair from 580 to 669.
VantageScore Ranges
VantageScores are still relatively uncommon, but they’re gaining more traction. VantageScores range from 781 to 850 for excellent credit to 500 to 600 for poor credit, and very poor credit is 300 to 499.
What Credit Report Factors Cause Bad Credit?
Having bad credit is generally considered to have a FICO score of 580 or below. Lower scores in the fair credit range are also considered to be bad credit, and this can occur if any of the five key factors in your credit report have negative information.
Payment history is the most important factor, and any missed or late payments can significantly lower your score. Other factors include amounts owed, length of credit history, credit mix, and new credit.
Negative information in any of these categories can lower your credit score, but some have a greater impact. For example, payment history is weighted heavily, and any loan defaults or credit charge-offs are especially damaging. The credit utilization ratio, which compares your current debt to available credit, is also important. Having too much debt can lower your score into a bad credit range.
Length of credit history, or account age, is also important. It’s best to keep older accounts open and avoid new credit unless necessary. Having diverse forms of credit—such as revolving credit, unsecured installment loans, and self-collateralized loans—can help boost your score. Hard credit inquiries, which occur when applying for new credit, can lower your FICO score by up to five points.
How Long Do Late Payments Stay on the Credit Report?
Late payments remain on your credit report for seven years from when it was first reported. It’s important to note that a payment is not considered delinquent until it’s 30 days past due.
How Long Do Defaults, Charge-Offs, & Collections Stay on the Credit Report?
Defaults, charge-offs, and collections remain on your credit report for seven years from the first missed payment. Student loan delinquency is also reported and remains on the report for seven years.
What is a Credit Report?
Your credit report is a record of your credit activity that lenders and credit card issuers use to determine your creditworthiness. In some states, utility companies, insurance companies, and employers can access your credit file. This information is called your credit history. It's compiled from most financial institutions where you have a credit account.
The three main credit bureaus that produce consumer credit reports are Experian, Equifax, and TransUnion. Each bureau calculates a credit score based on your credit history. The two primary credit scoring models are FICO® scores and VantageScores®, both of which are three-digit numbers ranging from 300-850. The higher the credit score, the better your credit standing.
FICO Score Ranges
FICO scores are the most commonly used credit scores. Over 90% of the top lenders use FICO scores to make credit decisions. FICO credit score ranges are:
Exceptional: 800-850.
Very good: 740-799.
Good: 670-739.
Fair: 580-669.
Poor: 300-579.
VantageScore Ranges
The three credit reporting agencies developed VantageScores to standardize consumer credit scores. While they’re less used, VantageScores are gaining more market share. VantageScore ranges are:
Excellent: 781-850.
Good: 661-780.
Fair: 601-600.
Poor: 500-600.
Very poor: 300-499.
What Credit Report Factors cause Bad Credit?
A bad FICO score is generally considered 580 and below, but some lenders view the lower end of fair credit scores as bad credit since that range is regarded as subprime credit. The credit bureaus calculate your credit score based on five key factors in your credit report, each weighted differently. Those scores are:
Credit history: 35%.
Amounts owed: 30%.
Length of credit history: 15%.
Credit mix: 10%.
New credit: 10%.
Negative information in any of these categories will lower your credit score, but some have a greater impact. Payment History is the most significant factor. Late or missed payments, loan defaults, credit charge-offs, collection account statuses, foreclosures, and bankruptcies all have a negative effect on your credit score.
Amounts Owed also has an impact on your credit score. The credit bureaus use the credit utilization ratio to determine amounts owed. This ratio takes your current debt over your available credit and converts it to a percentage. Credit usage rates over 30% can cause your credit score to go down.
Length of Credit History is also called account history or time in file, and it measures how long a credit account has been active. The older your credit accounts, the better. Too many new or recently opened accounts lower your average account age, which can lower your score.
Credit Mix is the diversity of forms of credit you have. Examples include revolving credit like credit cards or store credit, unsecured installment loans, and self-collateralized loans like mortgages or auto loans. Having too much of one form of credit could hurt your score.
New Credit refers to when you apply for new credit. The lender requests your full credit report. This is called a hard credit inquiry, also called a hard pull. Each hard pull could lower your FICO score by as much as 5 points.
How long different negative items stay on the Credit Report?
Negative information remains on your credit report for different lengths of time, depending on what it is.
Late payments remain on your credit report for seven years from when it was first reported.
Defaults, charge-offs, and collections remain on your credit report for seven years.
Student loan delinquency remains on your credit report for seven years.
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