A person’s credit history (also known as credit score or credit file), is a detailed record of how he/she has managed debt over time. It lists credit accounts and their outstanding balances, how often the individual was late in paying an account, whether any account for that person was ever turned over to a debt collector, whether the IRS ever put a lien on that person’s assets, and whether any creditor ever obtained a judgment against that person after a lawsuit. The credit history also shows whether that person ever filed bankruptcy.
Each of the credit reporting agencies collects information from public records and then maintains that information in a computerized database. The information can then be sold to anyone the law says is entitled to use it. Basically that includes five groups:
Creditors use your report in deciding whether to increase or decrease credit limits, or even whether to cancel the account, as well as to decide whether to lower or raise the interest rate you’re being charged or to leave it as is.
Employers initially use your report to help decide whether to hire you. Later, the report helps an employer decide whether to give you a promotion (or a demotion), or whether to fire you.
Insurance companies use your credit report to decide whether to sell you insurance and whether to charge you standard rates or increased rates.
Landlords use the credit report to help decide if they want to rent you an apartment – or an office for your business. The landlord wants to know if he can depend on you to keep up your rent payments.
Government agencies use the credit record to help decide if you are to be given a security clearance or perhaps a special license for which you’ve applied.
Your credit record can be restored after bankruptcy. While a Chapter 7 bankruptcy will stay on your credit report for ten years and a Chapter 13 for seven years, you will be able to rebuild your credit.
As a bankruptcy attorney in Indiana for almost twenty-five years, the one thing I want to stress to everyone is this: Your credit report is your passport. Don’t leave home without it. You won’t get very far!