In America, there seems to be an obsession with having a high credit score, which is brought about with good reason: a credit score determines your eligibility for home ownership, loans, and credit cards. While most people do keep track of their financial doings, there are always a few who, by one way or another, fall between the cracks.
If you are one of those people, if you have been faced with bad marks on your credit score, then take the time to read the information below. You will not only find the culprit, but also how to rid yourself of it as soon as you are able.
Things That Can Lower Your Credit Score
Simply put, bankruptcies are outright statements that declare you are unable to repay your debts. Chapter 13 bankruptcies are typically removed in seven years, while Chapter 7 and Chapter 11 bankruptcies can take ten years or more. Even if you repay your dues, there is no certainty these bad marks will be taken from your credit report.
When you foreclose on a house, it means you have given the bank free reign of your property due to an inability to pay. This bad mark on your credit score lasts about seven years, whether or not your property is resold. It can also lead to difficulties qualifying for future home purchases, as well as credit cards.
- Tax Liens
Tax liens are government documents that give all ownership of your assets to the government, until your debts are paid. Many of these are due to the failure to pay property or income taxes. While your debts may be forgiven through a bankruptcy court, the tax lien will continue to haunt your credit report for another seven years, after it is paid.
- Consumer Debt
Consumer debts are accrued through the use of credit cards and, if not paid monthly, will make an appearance on you credit report for seven years. This is why it is crucial you know whether or not you can afford to pay for something, before you swipe your card.
- Lawsuits and Convictions
Lawsuits that involve debt tend to stay on your credit report for seven years, however criminal convictions are bad marks that will stay on your record for an indefinite amount of time. They can also disqualify you for certain careers, home ownership, and custody of your children.
- Late Payments
While missing a payment here and there is not bad, being frequently truant will spell trouble for you and your credit score. Late payments, while typically not reported until they are a month or more past due, will remain as a black mark on your credit score for seven or more years.
- Credit Inquiries
Credit inquiries can remain on your credit score for one or two years, depending on whether they are a “hard pull” or a “soft pull.” “Hard pull” credit inquiries, which last two years, are initiated by you and can act as a bad mark on your credit score. “Soft pull” inquiries, on the other hand, only show up for one year and do nothing to your monetary reputation.
How to Deal
Many people are shocked, frustrated, and sad when they come to find a monetary mistake documented on their credit report. If you are like most people, you work to fix the problem as quickly as you can. Should you be curious as to what your efforts hold in store for you, see if your collector is one that does a periodical update on the status of his or her debtors. This way, you will see if you can get your name off the “hit list” even quicker than before.
Another effective solution is to take a step back, breathe, and know the situation is temporary. As long as you are working to make amends with your errors, you will never have to worry about them rearing their ugly heads, in the future.
Things You Can Do
If you see a bad mark on your annual credit report, the best decision you could make is to ensure the debt is paid as soon as possible. As a result, you will have less likelihood of seeing it for another seven-to-ten years. You might also want to meet with a financial advisor or a credit counselor, to make sure you don’t make the same mistakes in the future.
When looking back, know that everyone has made a financial error at one time or another, whether these errors turned into crippling debt, however, is entirely up to the individual. Even if you are in a rough place right now, it is never too late to seek help and resources that will aid you in repaying your dues. While the effort may be exhausting and full of sadness, confusion, and anger, it is better than having your owings following you for the rest of your days.