Each year, you are entitled to request 1 free credit report from each of the three major credit bureaus, TransUnion, Experian and Equifax, and it’s important that you regularly review your credit report so you are aware of your credit standing. However, because you, like many people, do not look at credit reports everyday – or maybe not even once a year, you can be confused by them, and you may not know what to look for in terms of red flags or things that need to be remedied.
Here is a list of credit report red flags to be aware of the next time your review your credit report:
- Late payments – Having a late payment, as well as how late the payment was and how long ago this occurred, can damage your credit score. However, the longer ago the late payment was, the less damage it will generally due to your credit.
- High ratios of debt to credit limit – The nearer the amount of your debt is to the amount of your credit limit, the worst off it will be for your credit rating. In the most ideal cases, this ratio is less than 10 percent.
- Collection activity – If you have not paid some debt and it has gone to collections or has been written off as a bad debt, this can also negatively effect your credit rating. If, however, you notice a collections activity that is not yours, you can dispute it in an attempt to have it removed from your credit report.
Staying abreast of your credit score can be key to minimizing your debt and avoiding bankruptcy; however, regardless of how fiscally responsible you are, sometimes unforeseen events – like serious illness, unemployment or divorce – can put a tailspin on your ability to manage debt and may necessitate filing for bankruptcy. If you are considering filing for bankruptcy, consult with our financial experts to learn more about the best options for your situation and future.