What is the Credit Score After Negative Items Are Removed?

Events such as bankruptcies, car repossessions and charged-off credit cards have a negative impact on your credit score. When these items are removed from your credit report, it can cause your credit score to rise. However, many factors have an impact on your credit score and no two people's credit reports are exactly the same. Therefore, you cannot accurately predict how the removal of a negative item will impact your score.

Negative Events

In terms of credit reporting, a negative credit event can hurt your credit score in two ways. Firstly, the fact that the event actually happened has an impact on your score. Secondly, failure to resolve the negative event also has an impact on your score. This means that a charged-off credit card shows up on your report and while you can minimize its impact by paying off the debt, the fact that you failed to pay it to begin with remains on your report.

Paid Versus Settled

You cannot remove a delinquent debt from your credit report by paying it off but if you pay it off then the creditor reports the debt as closed rather than outstanding. If you pay the debt in full, the creditor informs the credit bureau of the pay off and your credit report says "paid." You tend to see a bump in your score when this happens. If you agree to settle the debt for an amount below the outstanding balance, then your creditor notifies the credit bureaus that you "settled" the account. Settled accounts are little better than delinquent accounts in terms of your credit score because essentially in both circumstances you failed to pay your debt in full.

Removal

Negative credit events remain on your credit report for seven years with the exception of bankruptcies, which stay on your file for 10 years. However, credit score calculations are heavily tilted towards recent credit activity rather than past history. By the time a seven- or 10-year-old debt clears your report, it really has very little impact on your credit score anyway. Therefore you should not expect an immediate bounce when these items disappear.

Considerations

You can improve your credit score by paying all of your existing debts on time and attempting to keep low balances on revolving credit accounts such as credit cards. Additionally, limit your applications for new credit because frequent credit inquiries are usually associated with people who are having money problems. Positive credit related data helps to offset negative events and often has more of an impact on your score than the gradual removal of old debts.