Credit checks are your ticket to everything from a new credit card account to a loan for furniture, a car or even a new house. The Federal Reserve Bank of San Francisco's website explains that the credit bureaus gather your financial data and compile reports for lenders. They cover your credit-related activities for several years to give a long-term picture of your credit worthiness.
Lenders check your credit by reviewing your credit reports from the Experian, TransUnion and Equifax credit bureaus. Their review goes back as far as the dates of the information on those reports. Reporting time frames vary, depending on the specific type of information. The Federal Trade Commission (FTC) explains that a bankruptcy stays in your records for 10 years, while most other negative information, like late payments, car repossessions and foreclosed homes, remain for seven years. Closed accounts that were in good standing show up for 10 years, according to the Experian website.
Credit scores are calculated based on your credit bureau files, so they consider information going back seven to 10 years. FICO, the largest scoring company, explains on its website that it considers things like promptness of payments, current and previous account balances and credit limits, length of time you have used credit and how long you have had particular loans and credit cards. Your score continually changes, according to the MyFICO site, so it goes up when old delinquencies or other negative data gets erased.
Everything in your credit reports is visible to lenders who view them while processing your applications, but they do not weigh everything equally. Lita Epstein explains that they look most closely at your recent activity, focusing on the past three to five years. You have a good chance of getting approved for a credit card or loan if you have built up several years of on-time payments, even if you have collection agency accounts or even a bankruptcy in your past.
Negative credit report items do not always get erased when the reporting period ends. You are allowed to get free credit report copies to check their status. The FTC explains that you must get the reports from the official website, annualcreditreport.com. Search for old items, and file a dispute with Experian, TransUnion and Equifax is you find any outdated data. The bureaus let you do this electronically on their websites, and the law gives them 30 days to handle your complaint. Then they are required by the Fair Credit Reporting Act to send you corrected credit report copies so you can be certain the old items are gone.
- Experian: Frequently Asked Questions
- Federal Reserve Bank of San Francisco: Your Credit Report, What it Says About You
- Federal Trade Commission: How to Dispute Credit Report Errors
- MyFICO: What's In Your FICO Score
- MyFICO: About Credit Scores
- Wallet Pop: How Long Does it Take to Rebuild Credit After Bankruptcy?