How Long Does Negative Information Stay on Your Credit?

Negative items such as late payments, judgments, liens and charge-offs will haunt any credit record. For how long depends on the type of negative information and what the consumer does to remedy the situation.

Late Payments

Late payments will show up on an average credit report for two years, as long as the account is open. A credit report will reflect payment history for the most current two years. If the account is closed, that late-payment history will show up until the account is removed, up to seven years later. The older the late payments, the less they affect your credit score, but they will still be visible until on-time payments have been made for two years.

Judgments/Liens

Judgments and liens are a little different. These will stay on your report, if unpaid, until the statute of limitations runs out or seven years passes, whichever is longer.

Bankruptcy

Bankruptcies are reported for 10 years from the date the debt is discharged. There is nothing you can do to remove this information or shorten the time it takes to have it removed.

Other Negative Items

Other negative information, such as credit card charge-offs and collections, will be removed after seven years from the date of the last report. If these accounts remain unpaid, they can continue to be reported, which will keep them on your report indefinitely.

Considerations

Your credit report is like your motor vehicle record. Even if the negative information doesn't show up on your report, that doesn't mean it's not there. Negative information can be included in your credit report when you apply for a loan of more than $150,000 or a job that pays more than $75,000 annually, according to Brightscore.com, which advises consumers about managing credit.

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What Is a Safe Credit Score Number?

Few numbers are as important today as your credit score. Lenders, whether they're approving mortgage, auto, personal or business loans, rely on this score to determine not only if you qualify for a loan, but also what interest rates you'll pay. A low credit score means that you'll pay higher interest rates. Knowing the basics about what makes a bad credit score can help you decide when to apply for a loan and when to wait.

A Bad Credit Score Can Hurt

Too much shopping, resulting in too much debt, can leave you with a bad credit score.

A credit score is a numerical representation of how well you've managed your money. A low score--and most lenders consider anything under 620 to be a low or "bad" score--means that you'll have to pay higher interest rates. Borrowers with a credit score of 520 will pay an interest rate that is 3.45 percentage points higher than a borrower with a credit score of 720, according to Fair Isaac Corp., the company that developed the credit score.

What Is Considered a Safe Number?

You'll pay fewer dollars in interest with a high credit score.

Lenders consider any score above 620 to be a safe credit score, according to financial Web site Bankrate.com. But "safe" is not the same as "excellent." Most lenders want to see even higher scores, according to Bankrate.com. Fair Isaac Corp. reports that scores of 720 or higher nab the best interest rates.

Most Have Safe Scores

Most consumers are credit-wise.

The good news is that most borrowers do have scores of at least 620, the threshold that separates "safe" borrowers from "risky" ones in the eyes of mortgage lenders. Bankrate.com writes that 11 percent of U.S. residents have credit scores between 600 and 649, 16 percent from 650 to 699, 20 percent from 700 to 749 and 29 percent from 749 to 799.

Scores Can Rise

Hide your credit cards to help improve your credit score.

If your credit score is not considered "safe" by lenders, you can take steps to improve it. Start paying all your bills on time. Close some of your open credit card accounts. Cut your revolving debt. Do all this on a consistent basis, and your scores will gradually rise.

No Quick Fix

You might need to wait before taking out that mortgage loan.

Unfortunately, there is no quick fix for repairing a low credit score. Boosting a score takes time. It might make more financial sense to wait to apply for that car or mortgage loan until you've increased your credit score into the "safe" zone.

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Is Alimony on Credit Reports?

Information about alimony agreements does not appear on credit reports. The reporting agencies are more interested in how responsible you are in paying your bills, and they also monitor any derogatory information about your financial status, such as judgments, liens, foreclosures, charge-offs and bankruptcies.

Disclosing Alimony

Disclosures about alimony arrangements are made by the consumer. When you fill out an application for credit, lenders by law are allowed to ask if you are obligated to make any alimony or child support payments. They are not allowed to ask if you are receiving alimony, or the amount, unless you are relying on that income to qualify for your loan or credit line.

Proving Your Income

Your lender will ask about your employment and income as part of the application process for credit. You'll be asked where you work, and how much your earn. You are also free to list additional income, such as alimony payments. It's up to the lenders to confirm that the information you provide is correct. For major loans, such as a home mortgage, lenders might request income tax returns, paycheck stubs, bank records and court documents.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) offers consumers many protections. Among them, it ensures that lenders may not refuse reliable alimony payments as a legitimate source of income. However, the lender can ask you for proof that you have been receiving your alimony payments on a regular and consistent basis.

Protection for Spouses

The Federal Trade Commission recommends married couples establish credit in their own names, no matter who is considered the head of the household. This makes it easier for either spouse to continue on with a credit history in the event of a divorce or death.

Documentation

Be sure to maintain accurate records of your income from alimony. Make copies of checks or money orders from your ex-spouse. Some home mortgage applications require proof of income for the past two years, so be sure to hold on to your records.

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How Does a Tax Lien Affect Your Credit?

A tax lien is one of the final collection steps that a government takes in order to collect a tax debt that it is owed. It involves making a legal claim against the property of a person or company who owes taxes that are past due. A tax lien not only affects the ownership status of the property, it also affects the owner's credit rating.

Significance

Tax liens appear on your credit report as a public record. Other examples of public records are bankruptcy filings or judgments. Public records appear in their own section on your credit report. The credit scoring models treat each type of public record differently when calculating a credit score. The effect of a tax lien will also vary depending on the individual circumstances. If a person has a perfect credit history and a tax lien is reported, their score will drop considerably. If they have multiple negative entries then the effect of a tax lien by itself will be much less as their score is already considerably damaged.

Time Frame

Tax liens can stay on your credit report longer than most other negative items. An unpaid tax lien can remain on your credit report for up to 15 years. A paid tax lien can be part of your credit report for up to seven years.

Function

A tax lien is primarily used to secure the payment of taxes owed. In addition to this, a tax lien will make it difficult for you to obtain credit due to the negative credit report entry. Many people are extremely concerned with the information on their credit report or with their credit score and how it affects their ability to borrow money. This concern may lead a person to pay the lien faster than they otherwise would.

Considerations

Your tax bills should be some of the first bills that are paid. If you do not pay them the resulting tax lien could cause you to lose your home or other property. Another consideration is that outstanding tax bills in most cases can not be discharged in a bankruptcy action.

Warning

If you have a tax lien placed on property that has a mortgage against it, the tax lien takes first position amongst the outstanding liens. This means that if the property is sold, the tax debt will be paid first before any other mortgage is paid. Many mortgage lenders consider the placement of a tax lien against your property to be a default on the loan agreement. They can report this as a default on your credit report, giving you another negative credit report entry. The mortgage holder may also begin foreclosure proceedings if a tax lien is placed on your property. Foreclosure is one of the biggest negatives that your credit report can show.

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What Credit Information Makes up the FICO Score?

Fair Isaac Corporation provides one of the credit scores that lenders use when evaluating your credit application. Your "FICO" score is a number between 300 and 850, with a low number indicating a risky borrower and a high number indicating a low-risk borrower with good credit history. You actually have three credit ratings, one from each of the major credit bureaus, and all are based on a few types of information that appears on your credit report at that bureau.

Payment History

The most important factor in your credit score is your payment history, which makes up 35 percent of your score. This is what most people think of when they hear about a credit report. Creditors regularly report to the bureaus how much you paid and whether it was on time. The more on-time payments you have on your credit score, the higher your FICO score will be. Late payments lower your credit score, especially if they are recent. In addition to your accounts in good standing, your collection accounts, court records of bankruptcy or credit-related judgments and wage garnishments all affect your score.

Account Balances

Another 30 percent of your FICO score is made up of information on your account balances. In addition to the dollar amount you owe, your score considers the ratio of the amount you owe now to the amount you borrowed in the first place, or in the case of a credit card, your limit on the card. One of the best ways to improve your score in this area is to pay down your credit card balances so you are using only a small percentage of your available credit.

New Credit

About 10 percent of your score is based on credit that you have obtained recently. One piece of information that affects this area is the list of creditors that have looked at your report recently in response to your application for credit. Having many credit inquiries lowers your score. In addition, each new account that you open lowers your score, especially if a high proportion of your credit accounts are new.

Types of Accounts

Credit accounts fall into two major categories: installment accounts and revolving accounts. Installment accounts generally have a fixed monthly payment and an end date on which you will have paid your debt in full if you stick to the schedule. Mortgages and car loans fall into this category. Revolving accounts are those on which you are continually borrowing and repaying money, as with a credit card or line of credit. About 10 percent of your score considers the variety of account types that appear on your report. Having one or more accounts in each category helps your score because it shows that you can manage different types of credit.

Length of Credit History

The most difficult part of your credit score to change expediently is your length of credit history. This component makes up about 15 percent of your score. Your score does not only consider how long you have had your oldest account, but also how long you have had accounts in each of the categories of types of accounts. Your average account age also affects your score. The longer your credit history, the better your score.

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How to Rebuild Credit With No Security Deposits

Credit issues can influence your ability to purchase a vehicle, a home and get a job. Even if your credit score is suffering, there are several changes that will help rebuild credit without a security deposit. Using the credit you have to build a positive history and looking for possible credit reporting errors can help rebuild your credit over time.

Instructions

1

Pay existing bills on time. This might seem like common sense, but according to Entrepreneur website, it's one of the simplest ways to rebuild credit. Consider setting up automatic payments to your creditors with your financial institution. This will prevent last-minute scrambling and oversights that could further damage credit.

2

Keep credit balances low. If you have credit cards, keep your balances low. A balance that exceeds 35 percent or more of the credit limit can pull down your credit score. Also, paying down large balances will show your ability to reduce your overall balance, which will help rebuild your credit.

3

Take care of collection issues. Creditors want to settle your debt. Contact your creditor and negotiate a payment plan that fits your budget. As a result, the creditor will start making positive reports to the credit bureau, which will rebuild credit over time.

4

Avoid closing old accounts. It might be tempting to close all unused account. According to Entrepreneur Magazine, however, this might aversively affect your credit rating.

5

Clean up your credit report. Inaccurate information on your credit report could be hurting your credit (without your knowledge). You are entitled to a free credit report from all three credit bureaus--Equifax, Experian and TransUnion--every 12 months. Review it carefully and report inaccuracies, such as late payments and accounts that don't belong to you, to the credit reporting bureaus. Make sure to include supporting documentation, such as account statements or a police report in cases of fraud.

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Where Can I Find My FICO Score?

A FICO score is what retailers and financial institutions use to judge your ability to pay your bills and repay loans. Consumers can check their credit history to make sure there are no irregularities on the report. There are myriad ways to get your score from credit-reporting companies, personal finance sites and FICO itself.

Annualcreditreport.com

Credit scores are usually not given to you by banks or others who check your report. You can order your credit report for free from annualcreditreport.com.

Credit Bureaus

You can also elect to contact each of the three credit bureaus--Equifax, TransUnion and Experian as of 2010--to purchase a copy of your credit score. Each credit-reporting company may have a different score.

Credit Monitoring Sites

CreditKarma.com and Quizzle.com allow you to sign up and get credit score information for free. CreditKarma allows as many inquiries as you want, while Quizzle.com will send a free credit report and score every six months.

Additional Options

Bankrate.com and credit.com also offer credit calculators free of charge that allow you to check the state of your credit history.

MyFICO.com

FICO, the company that creates the FICO score will sell you your score for a fee. Go to MyFICO.com to purchase your score and credit report.

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