Many people believe that credit cards, mortgages, car loans and similar transactions are the only factors that affect their credit rating. However, public records, particularly derogatory public records, can have a detrimental affect on an individual's credit rating. Also, depending on the nature of the derogatory public record, the notation may remain on a credit report for years, even after it has been fully paid off.
What are Public Records?
Public records are maintained by federal and local government agencies, with some level of access to the public. While some public records, such as divorce records, do not have an adverse affect on credit, public records that pertain directly to an individual's financial transactions definitely do bear on a person's credit status.
Foreclosures
Added to the hardship of losing one's home, foreclosures are considered a derogatory public record. While falling behind on mortgage payments is not considered public information, once legal action has been taken, it becomes a matter of public record. A foreclosure definitely has an adverse affect on an individual's credit.
Judgments and Liens
Tax liens are a means of collecting money owed by attaching the wages or assets of an individual. Tax liens may be filed by the federal government or a state in the absence of a payment agreement or other negotiated settlement. Judgments are granted to creditors and merchants who successfully bring suit against an individual for failure to pay a lawful debt. Tax liens and judgments are considered derogatory public records.
Bankruptcies
For consumers, the most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a general dissolution of debt by a debtor unable to meet his financial obligations. The financial slate is essentially "wiped clean." Chapter 13 is a negotiated repayment plan that allows an individual to settle his debts for a fraction of the actual amount owed. Both Chapter 7 and Chapter 13 are considered derogatory public records.
How Long They Are Reported
Most derogatory public records remain on a credit report for seven years from the date they are filed. Chapter 7 bankruptcies and unpaid Chapter 13 bankruptcies remain on a credit report for 10 years. Unpaid tax liens remain on a credit report indefinitely. Payment of the derogatory item does not affect these reporting times, although consumers can have the payment noted on their credit report along with the derogatory public record.
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