The Basics
A credit report is an official record of all your credit-related actions over a specific period of time. On your credit report is a list of checking and savings accounts, credit cards, loans, and other things of this nature. Also reported on your credit report is any delinquent credit you may have. Your credit report is used by lenders to determine whether or not they want to give you new lines of credit, and the information contained in it is taken into very careful consideration when those decisions are made.
Collections
Generally speaking, if you are three to four months late paying a bill or loan, a record of your delinquency is sent to a collections agency. While a late payment can appear on your credit report after 30 days, going 90 to 120 days is when it starts to be considered "Delinquent Credit." These organizations specialize in getting people to pay back money they owe that they have stopped making payments on. Delinquent credit stays on your credit report for seven years. This is the same amount of time a simple late payment stays on your credit report. This will have a negative effect on your credit rating which will result in applications for things like loans and credit cards being denied.
Charge Off
After extended periods of time collection agencies can offer you what is called a "Charge Off." This is when they agree to allow you to pay less than you owe to settle your debt. Just like with delinquent credit, a charge off remains on your credit report for seven years. Charge offs are a red flag for potential money lenders as not only does it show you were delinquent on credit payments for an extended period of time, but it also shows that your previous lender did not recoup all of their money.
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