Do you need help to remove negative items from credit report history? It takes only 1 Negative Item Can Decrease Your Credit Score by 110 Points.
Your credit reports include a lot of personal information, such as your name, address, phone numbers, place of employment, and credit history. These accounts include credit cards and loans.
If you’re late paying your monthly payments on your credit accounts, this negatively influences your credit scores. Lenders are less likely to approve future applications if they see delinquent bills.Types of negative items include overdue payments (30, 60, and 90 days), collections, foreclosures, charge-offs, repossessions, judgments, bankruptcies, and liens. We’ll go over what each one of these means and how they can impact your credit scores.
How Much Will Negative Items Drop my Credit Score?
According to CNNMoney and CreditCards.com, even a single negative mark on your credit could cost you over 110 points. Negative accounts on your credit report could cost you thousands in higher interest rates, or you could be denied altogether.
Late payments get reported on your credit report when you have been 30, 60, or 90 days late paying an account. Although you don’t ever want late payments on your credit reports, the occasional 30-day late payment isn’t too severe. Just a single recent late payment on a single account can lower a credit score by 15 to 50 points, and missing one payment period for all accounts in the same month can cause a score to drop by 150 points or more.
Payments 90 days overdue start to factor more heavily into your credit report. Consecutive late payments are even more damaging to your score, as each subsequent tardy payment is weighted more heavily. When creditors report payments as late as 120 days, this is almost as damaging as a charge-off. Late payments are reported to the credit bureaus when you are more than 30 days late on an account.
Can Late Payments Be Deleted from Your Credit Report?
Though late payments and most other adverse information can be reported for seven years, it doesn’t have to be. Creditors have the option to report your late payments, and other adverse accounts, for less than seven years.
How Can Late Payments be Removed from my Credit Report?
Regarding late payments, there are a few ways CreditStryke can help you remove them:
- Goodwill Adjustment: A Goodwill Adjustment is an option you can use for late payments. Creditors are more likely to consider this type of request for a 30-day or 60-day delinquent payment than they are for something like a 90-day late payment. To request this, you should write a letter to your creditor asking them to remove the line item as a gesture of goodwill. You can bring up for their consideration your longstanding relationship and the intention to continue that relationship, the guarantee never to repeat the mistake, and the fact that this is a single minor infraction in an otherwise unblemished payment history with them. These Goodwill requests are typically granted only if you don’t have any prior late payments.
- Dispute with the credit bureaus: According to the Fair Credit Reporting Act, you have the right to dispute reported late paid accounts with the credit bureau. Once you file a dispute with the bureaus, the bureaus’ in-turn asks your creditor to review your account. If the creditor can’t provide the bureaus with the information or verify the disputed items’ accuracy, the bureaus will choose to remove the information.
- Opt for automatic payments: Though this doesn’t allow previous late payments from being eliminated, it can guarantee you won’t pay your accounts late in the future. Establishing automatic payments is convenient, and you don’t have to memorize every single due date for all your bills.
A charge-off is when a creditor writes off your unpaid debt. Typically, this occurs once you have been 180 days late on a credit account. Charge-offs have a severely negative impact on your credit, and like most other harmful items, can stay on your credit for seven years. When an account is charged-off, your creditor can sell it to collection agencies, which is even worse news for your credit.
Creditors see a charge off as evidence that you have not been responsible with your finances in the past and most likely can’t be counted on to satisfy your financial obligations in the future. When creditors see a charge-off on your credit report, they are more likely to decline any new applications for loans or credit lines because they see you as a financial risk. If you do qualify, this will mean higher interest rates. Current creditors can penalize you by raising your interest rates on your existing balances.
Does Paying a Charge-Off Increase My Credit Score?
When an account is charged-off, you are still financially responsible for it. If you have a charge-off and know that it’s accurate and you owe the debt, you may consider paying it off. Suppose you pay a charge-off before the account is sold to a collection agency. In that case, you may be able to prevent additional damage to your credit score because a collection won’t be reported in addition to the charge-off.
Once an account has been paid-off, the creditor can still report the charge-off for seven years on your credit reports. In some cases, creditors are willing to negotiate “payment for deletion,” where the creditor can request the credit bureaus to remove the account once the debt is paid off. Remember, this is not something that creditors are obligated to offer and is up to the creditor’s discretion.
A collection is the most common type of account on credit reports. About one-third of American consumers with credit reports have at least one collection account. More than half of these accounts are due to medical bills, but other accounts like unpaid utilities, credit cards and loans, and parking tickets can be sold to collections.
Collections arise from unpaid debts. These collection accounts have a severe negative impact on your credit report and typically remain on your credit reports for as long as seven years.
How Can I Deal with Collections?
Trying to Deal with collections can be different from dealing with creditors on most other adverse accounts. Debt collectors make their money by buying debts from original creditors at a reduced amount and then collecting money from the debtor for the full amount. These agencies go to great lengths by sending you letters, calling you, and sometimes calling your employer or even family members.
Luckily, you do have consumer rights under the Fair Debt Collection Practices Act (FDCPA). This prevents debt collectors from making excessive phone calls, threatening you, and calling you before 8:00 AM and after 9:00 PM. You also have the right to demand that they not contact you by telephone, although they still have the right to contact you in writing. You have the right to dispute the debt in writing within 30 days of when you’re first contacted. If the agency can’t verify the debt’s validity, they can’t continue collecting it.
Do Medical Bills Have the Same Negative Impact as Other Collections?
Medical bills are by far the most common types of debts that are sold to collection agencies. With most credit scoring models, unpaid medical bills have the same impact on your credit score as other types of collections. However, recent credit scoring models have changed because unpaid medical bills are often a poor indicator of a consumer’s creditworthiness.
Because of this, FICO 9, FICO’s most recent scoring model, ignores paid medical bills. Unpaid medical bills also carry less weight. Your FICO scores are the credit scores that most lenders use when making approval and denials decisions when applying for new credit. This is excellent news for consumers who only have unpaid medical bills on their credit reports. However, not all lenders use FICO 9, which means that outstanding medical collections can still carry the same weight when applying new credit lines.
How to Know if I Have Collections Reported and What Can I Do About It?
The most efficient way to know whether you have an account in collections is by monitoring your credit. Many consumers are unpleasantly surprised when turned down for a loan due to an unknown collection account on their credit reports. Keep track of what’s on your credit report by pulling your free annual credit reports or signing up for a credit monitor service.
Once you know whether or not you have any collections on your credit reports, you have options as to what you can do. You can wait for the collection account to come off in the seven-year reporting period. You can dispute the account with the credit bureaus, either by yourself or with the help of a credit repair service. Or you can pay it. Remember, like with charge offs, settling the account doesn’t remove the collection from your credit reports unless the creditor agrees.
Not paying your mortgage for too long will result in foreclosure, often ending in legal action and eviction. It also results in long-term credit damage. A foreclosure will destroy your credit scores for up to seven years, and you will have a hard time securing another mortgage in the meantime.
As an alternative to foreclosure, some homeowners opt for a short sale.Though these still have a negative impact on credit reports and heavily impact your chances of buying a home. Some events make foreclosure necessary, such as job loss, but it should be carefully considered.
A foreclosure is a legal proceeding initiated by a mortgage lender when a homeowner cannot make payments. Usually, a lender will file a foreclosure when a homeowner has been three months late or more on mortgage payments.
When a lender decides to foreclose, they begin by filing a Notice of Default with the County Recorder’s Office, which begins the legal proceedings. If a foreclosure goes through and a homeowner can’t catch up on payments, they are evicted from their home, and the foreclosure is reported to the credit bureaus.
Rather than going through a foreclosure, a homeowner can choose to make a short sale. The homeowner agrees with the bank to sell their home for less than what is owed on the mortgage. Though the bank receives less than what is left on the loan’s balance, this can be beneficial for the bank because the foreclosure process is expensive and time-consuming. It can also benefit a homeowner because, depending on the short sale terms, the impact on the consumer’s credit may not be as severe. The credit scores will still drop, and they will often show as a settlement, which always has a negative impact, but the scores won’t drop as much as they do with foreclosure.
A repossession is a retraction of property on a secured loan. Secured loans are collateralized with assets like a car or a house, and the loss occurs when the lender retracts the property from the borrower because of the inability to pay. Usually, when this happens, the lender will auction the car to make up for the outstanding balance, although it doesn’t usually cover the balance.
When there is a outstanding balance, the creditor may choose to sell it to a collection agency. An auto repossession has a severe negative impact on credit because it demonstrates a debtor’s inability to pay back a loan. Typically, a repossession follows a long line of late payments and can knock many points off a credit score.
If someone cannot make monthly payments, they can turn in their collateral to their creditor or dealership. This is called voluntary repossession. The difference is that rather than the car being forcefully taken back by the creditor, it is voluntarily surrendered by the debtor. Like a regular repossession, the creditor auctions the vehicle and puts the money from the sale toward the unpaid balance.
Unfortunately, a voluntary car repossession still shows up as a repossession on credit reports. It even has a negative impact for seven years, but the relationship with the creditor may end up being better. Whether voluntary or involuntary repossession, there will most likely still be a remaining balance after the collateral is sold, meaning the bank can sell the account to collections or sue you for it. A repossession can also make it more challenging for you to get a new loan, and you may need to find a co-signer.
Alternatives if I Can’t Make My Car Payments?
Before allowing your late payments to escalate to an auto repossession, there are several options:
- Sell your vehicle: If you can find someone to sell your car to, this may get you out of your loan. When a repossessed vehicle is sold, it’s sold at an auto auction, typically for a much lower price than what is owed on it. Selling the to someone else may help you pay off your loan more quickly.
- Refinance: if your credit is good enough, refinancing your loan for a lower interest rate can help. Refinancing can also help reduce your monthly payments, though it will likely extend the term of your loan.
- Ask for a break: often, lenders are willing to work with you, especially if your financial problems are short-term. Your lender may allow you to skip a few payments. Though interest will still accrue, this can be an option to assist you get your finances in order. Communication with your lender is vital.
Judgments are considered public records that are also referred to as civil claims. A Creditor can win a judgment against a debtor for an unpaid balance. Like many other negative items, this has a negative impact, and like most other harmful items, can be reported to credit bureaus for up to seven years.
How Can I Handle a Judgment?
Before a creditor can win a judgment against you, you must be notified and obtain a summons to court. This is your opportunity to establish a defense against your creditor trying to get a judgment against you. If you’re not sure what to do, then you should consult a local consumer rights attorney.
When a judgment is granted and goes unpaid, it is considered “unsatisfied.” When a judgment is paid, however, it is considered “satisfied.” Paying a judgment won’t automatically remove it from your credit reports.
Two ways a court can rule on a judgment are to vacate or dismiss. When a judgment is dismissed, it means that the case was dropped. A vacated judgment means the case was canceled. These are both beneficial for the defendant, the person the creditor is trying to sue.
How are Judgments Reported?
Effective July 1st, 2017, Experian, TransUnion, and Equifax changed how judgments and liens are reported. The government meant these changes to be beneficial to consumers. For a lien to be reported by a credit bureau, the following information must be included on the credit reports:
- Social Security Number/Date of birth
If the information is missing or incomplete, it could result in the judgment being removed from a consumer’s credit report. Additionally, the credit bureau must check every 90 days to make certain the information is 100% accurate. This has already benefitted millions of consumers.
In most cases, liens result from unpaid taxes – whether at the state or federal levels. The IRS can place a tax lien on your property to cover the cost of due taxes. Tax liens can make it challenging to get approved for new credit or loans lines because the government has claimed your property. This means that if you default on any other accounts, your creditors have to stand in line behind the IRS to collect.
Unpaid liens can stay on your credit reports indefinitely. However, once they have been paid, they can remain on your reports for up to seven years. Like judgments, the credit reporting agencies are strictly regulated on how they can report liens because they are considered public records.
How Can Tax Liens Be Removed from My Credit Report?
Once a federal tax lien is paid off, a consumer can file an “Application for Withdrawal of Filed Notice of Federal Tax Lien. When the IRS approves, the lien can be removed from credit reports sooner than seven years.
Bankruptcy is extremely damaging to credit. Individuals who file for bankruptcy have too much debt and not enough money to pay it. They likely have had overdue accounts for an extended time and, in some cases, loss of income that prevents them from paying any of their bills. Bankruptcies can also arise from substantial medical debt.
Filing for bankruptcy can impact your credit for up to ten years. When a bankruptcy is filed, most debts, if not all, are discharged, and the consumer filing is released from most of their previously incurred debts. This option can give most people a “clean slate” from debt.
What Happens to Credit Accounts Included in Bankruptcy?
When filing for bankruptcy, a consumer has to list all of their debt. When debt is discharged in bankruptcy, it is all listed on your credit report as “included in bankruptcy.”
What Items Can Be Included in Bankruptcy?
Most credit accounts can be included in bankruptcy such as (but not limited to):
- Credit cards
- Medical bills
- Home/auto loans
- Utility bills
Accounts that cannot be discharged through bankruptcy include:
- Student loans
- Child Support / Alimony
- Unpaid Taxes
Can CreditStryke Help Me with My Negative Items?
CreditStryke has over five years of experience assisting thousands of consumers with credit repair. We’ve seen hundreds of thousands of removals, deletions, and all different types of adverse accounts on our clients’ credit reports. We use our experience and expertise to uphold your rights to a fair and accurate credit report. Call us today for a free credit score repair consultation.