How Negative Items Affect Your Credit Report
As we have talked about credit can affect almost every aspect of your life. Here is one more example of how credit affects you. This is taken from GMAC Insurance. This is the explanation of why a credit score affects your car insurance rates. These are from the FAQ section about credit.
“Do all car insurance companies use credit?
GMAC Insurance uses credit to determine your auto insurance quote, as do most carriers. According to a recent survey by Conning & Co., a Hartford, Connecticut-based insurance research firm, 92 percent of all insurance companies use credit information when underwriting new policies. It is important to note that a credit score is just one of several underwriting tools GMAC Insurance considers when determining rates; we also consider rating variables such as driving record, type of vehicle, where you live, your gender, your age, and other factors.
Why do insurers use credit?
Auto insurance companies use financial history along with other factors (such as years of driving experience) to properly classify an insured according to his/her potential risk. Numerous studies have shown a very strong correlation between a consumer’s financial history and his/her future insurance loss potential. Thus, auto insurance companies believe the use of credit helps to underwrite an applicant at a cost that most accurately reflects that particular applicant’s specific risk.”
The insurance companies feel that if you have bad credit you are a higher risk when it comes to driving.
I mentioned before that I worked in the credit industry for the past 6 years. I have talked to a lot of people about their credit situation. The one thing I found most disturbing was how many people were being turned down for jobs due to credit. I talked with service men, firemen, and others that were serving our country and communities. They were being denied promotions and/or employment due to their credit scores. When I say that your credit score can affect every aspect of your life I really mean it. I have seen circumstance over and over again. I also find that the credit score never takes into account circumstance.
I left the country for a couple of years. Right before I left I had a couple of my college teammates steal my credit card. They charged it up right after I left. I put that card away for my time out of the country and had no idea that my credit card was charged off and had now dropped my credit score. I returned two years later with bad credit. How long do you think this negative item affected my credit? It was able to stay on my credit for 5 more years. I didn’t know, but there are limits of time that a negative item can stay on your report. Below you will find a simple chart with the type of negative item and how long it can stay on your credit.
Think of how this impacts you. You can be late one time 30 days on a credit card payment and that can stay on your credit report for up to 7 years. The impact of negative items on your credit score is huge. You need to make sure that you are careful when dealing with your credit. It can take a very short time to screw it up, but it will take a very long time for it to be cleaned up.
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