Your credit report is a thorough overview of what debts you have, what debts you have had in the past and how reliable you are about making payments on time. Accounts that are marked as paid in full or current are considered positive items, but many people also have to deal with some more negative marks on their credit reports.
A negative item on your credit report can bring your credit score down and can have a long-term effect on how lenders see your creditworthiness, because negative items can stay on your credit report for a surprisingly long time. In general, the higher your score is when you get a negative mark, the more your score falls initially, but negative items have a smaller impact on your credit score as time goes on. Some of the most common possible negative items are listed below, along with how much they hurt your score and how long they stay on your credit report.
Late payments happen when you fail to pay an account, such as a credit card bill or mortgage payment, in full by the agreed-upon due date. Late payments have a strong effect on your credit score because your payment history makes up a full 35% of your credit score in the FICO model. Late payments can also stay on your credit report for as long as seven years from the date of the missed payment.
A charge-off is when a lender basically writes off your debt, acknowledging that you haven’t paid it and are not likely to pay it. However, it can still be sold to collections, or the lender can still file legal proceedings to get payment for the debt. Charge-offs are usually in the same category as late payments and have a similar effect on your credit score. They also stay on your credit report for at least seven years, starting from the date of the first delinquent payment.
A foreclosure happens when you haven’t made your mortgage payments and your lender sells your house in an attempt to recoup their losses. A foreclosure can be a major hit to your credit report because it usually involves several missed payments, each of which brings down your score individually. The foreclosure itself also lowers your score. Foreclosures stay on credit reports for seven years, starting from the first missed payment.
A bankruptcy is a serious negative item on your credit report and can have a major impact on your score. However, this is mostly true for those who had good to excellent credit before the bankruptcy. If you were struggling to pay your debts on time for a while before you filed bankruptcy, your credit score might already be low enough that the bankruptcy doesn’t have a significant lowering effect. How long a bankruptcy stays on your credit report depends on the type. Chapter 7 filings stay on for 10 years, and Chapter 13 filings stay on for seven.
Collection accounts are debts you didn’t pay that the original lender eventually sold to another debt collection company. Collection accounts fall into the payment history category of your credit report and can have a significant effect on your score if you’re sitting in the fair to good range. Collection accounts stay on your report for seven years from the first missed payment with the original creditor. Keep in mind that if you agree to payment arrangements with the debt collection company, make payments and then stop, you may be restarting the countdown clock for another seven years.
A hard inquiry is when a potential creditor runs your credit to see if you qualify for their product, such as an auto loan or credit card. Hard inquiries do bring your score down a bit, but this category makes up only 10% of your credit score. Additionally, a hard inquiry only stays on your credit for around two years. This means it has much less of an impact and is usually only a small, temporary hit as long as you’re applying for new credit responsibly.
Judgments and liens used to be considered negative items that lowered your credit score, but new reporting rules that were put into place in 2017 and 2018 ensured that these are no longer reported. However, if you have judgments or liens from before this time, it’s possible they may still be on your credit report and dragging down your score. If you see a negative mark like this on your credit report, you should be able to get it removed by contacting the credit bureaus. Keep in mind, however, that it’s possible the reporting rules could change again and allow these items to be reported in the future.
In some cases, it’s possible to remove negative items from your credit report, but it’s not as simple as some people think. In general, if you owed a debt and didn’t pay it, there may not be much you can do except wait for the item to fall off your credit report. However, if you see items on your credit report that you know are wrong, such as those listed under a similar name with a different spelling or for lenders you’ve never had a relationship with, it’s possible to have them removed by filing a dispute with the credit bureaus.
In some cases, such as if you missed one payment after years of on-time payments to your credit card company, you may be able to send a goodwill letter. In this letter, you explain the reason for the missed payment and point to your longstanding positive history with the lender, asking if they can remove the hit from your credit report this one time. The lender isn’t under any obligation to do this, but many will, so it’s worth a try.
You can also request that a lender verify the debt. This means giving you proof that you owe the debt. If the lender can’t do this, you can then dispute the debt with the credit bureaus and ask that it be removed from your credit report. This is most likely to work with debt that’s in collections and may have been bought and sold a few times, making the paper trail more complicated.
Some people might say or believe that a credit repair company can remove accurate negative items. However, this is not true. If the debt is legitimate, it usually cannot be removed and you’ll have to wait until it falls off because of the laws surrounding fair and accurate credit reporting.