5 Credit Report Red Flags

Posted on 2016-11-01 19:07:46

Your credit report is a snapshot of how you have handled credit. It reports the balances on your credit cards and loans, and your bill paying history. (Don’t think even a single late payment will go unnoticed!) When you apply for new credit, lenders review your credit report to determine the terms of any credit they might extend to you. Once you have established credit, that lender will most likely review your credit report from time to time to see look for red flags. Here are 5 red flags that could scare a lender: 1.  Too Many Inquiries When you apply for credit, potential lenders will usually pull your credit report to get a feel for your credit worthiness. This gets recorded as a hard inquiry on your credit report. Too many hard inquiries can be a red flag that you are in financial trouble. Although inquiries typically have minimal impact in most credit scoring models, it may be enough to drop you into a lower credit score bracket. 2.  Debt from Co-Signing a Loan Many people fall into the trap of co-signing a loan to help a friend of family member without realizing that debt will show up on their own credit report too. As a co-signer, you are equally responsible for the debt. Any late or missed payments will be red flags to your own lenders. And even when the loan is being repaid under good terms, that debt is added to your existing debt load when you apply credit of your own.

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3. Short Sale A short sale gets reported to the credit bureaus as “settled.” That’s a red flag that says you did not pay the lender as agreed, and it can be just as negative as a foreclosure on your credit report. There may be times when a short sale is the right option, but don’t believe anyone who says it won’t hurt your credit. 4.  Credit Report Errors Your credit report could have red flags that are no fault of your own: errors. There’s really no way to safeguard your credit report from them. It’s important to check your credit report for accuracy. A credit monitoring service will alert you to significant changes that should be verified for accuracy. 5.  A Consumer Statement You have the right to add a 100-word statement to your credit report explaining something you think might be viewed negatively. Think twice before doing this. Lenders expect to paid as agreed regardless of your circumstances. If, however, you have been a victim of identity theft, it might be beneficial to explain that in a consumer statement.

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