Knowing why your reports matter

The credit report you get is the same one that your current creditors and
potential future creditors use to make decisions about you. The more negative
information is in your credit histories (such as past-due accounts,
accounts in collection, accounts that your creditors have charged off as
uncollectible, tax liens, and so on), the worse your finances are.

Your existing creditors may use the information to decide whether to raise
the interest rates you are paying, lower your credit limits, or even cancel your
credit. And whenever you apply for new credit, the creditors review your
credit record information to decide whether to approve your application, how
much credit to give to you, the interest rate you must pay, and so on.

Many insurance companies, landlords, and employers also review your credit
record information. If they find a lot of negative information, insurance companies
may not agree to insure you or may charge you higher-than-normal
premiums; landlords may refuse to rent to you; and employers may not want
to hire you or to give you the promotion you applied for.

The federal Fair Credit Reporting Act says that most negative information
remains in your credit reports for 7½ years and that a Chapter 7 liquidation
bankruptcy and a Chapter 13 reorganization of debt linger there for ten
years. However, the three credit reporting agencies have a policy of reporting
completed Chapter 13s for only seven years. A tax lien sticks around until
you pay it.