Impaired Credit History

Your credit history gets impaired by many different financial activities. Fair Isaac Corporation, or FICO, takes information from your credit reports to calculate your credit score. The Experian, Equifax and TransUnion credit bureaus sell your credit history to lenders and insurers when you seek loans, credit cards and insurance, so impaired records hurt you by getting you rejected or subjecting you to higher interest rates or premiums.

Common Impairments

Past-due payments impair your credit history, as does ignoring a bill until it gets written off or sent to a collection agency. The MyFICO scoring website advises that repossessions, foreclosures and court judgments in favor of creditors or collectors also hurt you. You can hurt your credit score even if you pay all your obligations on time if your debt load is too high, you have too many credit cards, or you close old accounts that were in good standing.

Weight

Some credit history impairments carry more weight than others. The worst thing you can do is skip payments and let an account get charged off, and home and vehicle repossessions fall into this same category. Court judgments and bankruptcies get lumped into your payment history, too. All of these things make up 35 percent of your credit score, according to MyFICO. Owed money, the number of your accounts that have balances and your ratio of available to used credit accounts for 30 percent of the score.

Correction

Fixing impaired credit takes time and effort. Concentrate on the most important areas by paying all bills on time and putting more money on your biggest debts. The Federal Reserve Bank of San Francisco advises speaking to a credit counselor if you cannot get your finances back on track without help. Most bad items that cause credit history impairment disappear from your credit reports after seven years, and lenders place more emphasis on recent history in the meantime.

Warning

Your credit may be wrongly impaired because of mistakes on your credit reports that give lenders a bad impression and impact your credit score. Thirty-seven percent of the people who reviewed their reports in 2007 discovered harmful mistakes, according to survey company Zogby International. Fix these impairments by getting the free credit reports to which you are entitled yearly from AnnualCreditReport.com. Notify the Experian, Equifax and TransUnion credit bureaus about mistakes through their online dispute forms. The Federal Trade Commission advises that they must fix or remove bad data within 30 days.