Your credit history helps lenders, employers, insurance companies and other businesses assess your risk level by providing a written record of how you managed debt in the past. An unsatisfactory credit check is one in which derogatory information within your credit history disqualifies you from receiving the loan, credit card, job or other service you applied for. Various negative credit entries can result in an unsatisfactory credit check, depending on the company that conducts the inquiry and the specific credit standards it holds.
Poor Payment History
If you repeatedly missed payments to previous creditors and your credit report contains evidence of charge-offs and defaulted accounts, any new lender reviewing your report will consider you a much higher lending risk. The fact that you managed your debts poorly in the past suggests that you are likely to repeat the behavior in the future should the new lender or creditor approve your application. If approved, a poor payment history to other creditors will almost always result in a much higher interest rate on your new credit card or loan.
Large amounts of outstanding debt serve as a red flag to individuals reviewing your credit history – even if you send your creditors the minimum payment required each pay period. High debts indicate that you not only managed your finances poorly, but carry significant payment obligations that could hinder your ability to pay off a new loan or credit card.
Employers who check applicants’ credit reports also frown on high debts because the higher a consumer’s debt, the greater the risk that, if hired, the individual will steal from the employer in order to satisfy his obligations to his creditors.
Evidence of Misrepresentation
One little-known reason businesses conduct a credit check is to verify your personal information. The reviewer compares the personal information present in your credit report, such as your name, Social Security Number, address and birth date to the personal information you provided on your application. Major discrepancies suggest that you deliberately concealed or fabricated information and, without a valid explanation from you, could result in an unsatisfactory credit check.
Chapter 7 Bankruptcy
Most negative information only remains on your credit report for seven years before the credit bureaus delete it. Chapter 7 bankruptcies, however, can appear for up to ten years. When a consumer files for Chapter 7 bankruptcy, the courts discharge debts that the individual’s assets cannot pay – leaving her creditors little choice but to write off her debts as a tax loss.
Bankruptcy poses a considerable financial loss for creditors. A past Chapter 7 bankruptcy within your credit history indicates considerable mismanagement of debts and assets that resulted in your creditors not receiving their agreed-upon payment. Because of the risk that you could repeat the process in the future, a Chapter 7 bankruptcy may result in an unsatisfactory credit check for any lender not willing to accept the risk of default that you present. In addition, an employer reviewing your credit history has the right to deny you the position you applied for based on your previous bankruptcy.
- Bankrate: Turned Down for a Mortgage
- MSN Money: How Bad Credit Can Cost You a Job; Liz Pulliam Weston; 2010
- Federal Trade Commission: The Fair Credit Reporting Act (Section 605/p.22-23)
- Nixon Peabody: Employment Law Alert
- Equifax. "What is a Credit Report and What Does It Include?" Accessed Nov. 19, 2019.
- Experian. "What is Not On Your Credit Report?" Accessed Nov. 19, 2019.
- TransUnion. "What is a Credit Reporting Agency?" Accessed Nov. 19, 2019.
- Federal Trade Commission. "Free Credit Report." Accessed Nov. 19, 2019.
- Experian. "How Lenders View Your Credit." Accessed Nov. 19, 2019.
- Legal Information Institute. "15. U.S.Code § 1681c. Requirements Relating to Information Contained in Consumer Reports." Accessed Nov. 19, 2019.
- Legal Information Institute. "15 U.S. Code § 1681i. Procedure in Case of Disputed Accuracy." Accessed Nov. 19, 2019.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.