05.27.09
By John Ulzheimer
Credit reports have become somewhat easy reading since earlier this decade when the Internet provided an avenue for the credit bureaus to repackage their core offering and market it to consumers. Clean layouts, bright coloring, and plain English explanations have made once impossible-to-read credit reports much more consumer friendly. But at the same time they’ve made us much more lazy and dependent, much like spell check and calculators have. In this case, however, instead of misspellings and errors in simple math, we’ve lost touch about what can be considered negative on our credit files.
We’re all familiar with collections, bankruptcies, tax liens, and late payments. We all know these things are considered negative not only by credit scoring models but also by lenders and most others who review
credit reports. Therefore we’re not blind-sided when our
credit scores and credit reports are damaged by these items. However, the list does not stop there – not by a long shot. And the lower down on the list, the less intuitive the damaging items becomes. This allows these lesser-known items to be overlooked by the human eye, but not the credit scoring models.
Perhaps the most commonly overlooked negative item on a credit report can reside within the narrative coding. Sometimes referred to as narrative text, narrative coding is the one-liner, plain English description that accompanies the account (or tradeline) on your credit report. They’re not all negative; in fact, the vast majority of them are not negative. Some examples are: Credit card, Auto loan, Student loan, Home equity line of credit… these narrative codes all serve to further describe the type and status of an account.
It’s important to recognize that each of these narratives IS seen and evaluated by credit scoring models. And while most of them have no bearing, some do… and those that do can be more damaging than missing payments. Here are some of the culprits:
- Settlement accepted
- Forfeiture of deed in lieu of foreclosure
- Voluntary repossession
- Redeemed repossession
- Account included in the bankruptcy of another person
So just because your credit reports don’t show obvious late payments or other delinquencies, don’t think you’re off the hook for any risky credit activity. Remember, nothing can hide from your credit scores. If it’s on your credit reports, it’s fair game.
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