[T]here’s a lot of information on a credit report. If you’ve ever requested a free copy of your credit report, you may have been overwhelmed at all of the stuff on there. It makes you wonder what creditors and lenders really look at. Do they read every line or do they skim? If they skim, what are they looking for?
When a lender or creditor looks at your report, their first impression may be based on the size of it. A small credit report with only one or two items says you haven’t had a lot of credit or for very long. While this may not be a bad thing, it can make creditors worry about whether you can handle the responsibility that comes from having credit. This is one reason some creditors will deny you based on insufficient credit history.
Someone with a long list of accounts may also be a red flag. If they have closed accounts or have a lot of charged-off accounts or even just carry a lot of open credit accounts, it can mean too much risk for lenders.
For those creditors who just skim the report, they are going to focus on any negative information. They will look for late payments and charge-offs. They will look at these items in detail. The lenders will notice how old the accounts are and how many late payments you had. They will base their approval or denial on this data for the most part.
Some creditors look only at what you’ve done in the last two years. They won’t pay any attention to anything older than that. However, they may scrutinize the information within the past two years to see if you’ve handled credit with no problems. They may look at your credit balances even if you have no negative information.
Each creditor has their own system for reviewing credit reports. Just because one creditor turns you down based on specific information, it doesn’t mean every creditor will look at your report the same way.
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