If you’re suffering from bad credit there’s a good chance that you’ve made a few credit mistakes in the past. Before you beat yourself up too badly, though, it might help you to know that almost 60 percent of consumers in the US have FICO scores below 700. My point? You’re not alone. Having bad credit may leave you feeling like you’re doomed, forever.
One of the biggest misconceptions about having bad credit is that it’s permanent. Granted, you can’t always erase past credit mistakes, but it doesn’t mean you’re stuck with these mistakes for the rest of your life either.
The Value of Time
Regardless of your past credit mistakes, or how damaging those mistakes might be, the good news is that the older these incidents get, the less impact they will have on your credit scores. Your credit score is numeric summary of the information reported in your credit report at any given moment in time. This means that as new information is reported, added or updated in your credit report, your credit score will reflect those changes.
Regarding credit scores, negative information will certainly have a negative impact. However, every single one of your past credit mistakes will lose negative value as they age. The key to moving beyond bad credit and improving your credit scores is to begin adding new, positive information to your credit reports.
I’ll also share a little secret about credit scoring models: credit scores place more emphasis on your most recent credit history — it’s how well you’ve managed the last 12 to 24 months that has the greatest impact on your credit standing. Point being, time heals all credit wounds.
Another advantage to the passing of time is that each and every negative incident or item reported in your credit report is limited to a statute of limitations on how long it can legally be reported before it has to be removed. In most cases you can expect negative information to remain in your credit reports for seven years. However, as with most rules, there are exceptions.
How Long Do Negative Items Remain On Your Credit Report?
Here’s a breakdown of how long various types of negative information can be included in your credit report:
Late Payments remain on your credit report for seven years from the date the incident occurred.
Collections, Settlements & Charge Offs remain in your credit report for seven years from the date the account went into terminal delinquency status (typically the date of the first 180-day late payment). Note: The seven year reporting statute is specific to the date the account went into default with the original creditor–it has nothing to do with the date the collection agency bought or consigned the debt.
Repossessions & Foreclosures remain on your credit report for seven years from the date the account went into terminal delinquency stats (typically the date of the first 180-day late payment).
Judgments remain for seven years from the date filed.
• Chapter 7 bankruptcies remain for ten years from the date filed.
• Chapter 13 bankruptcies remain for seven years from the date discharged –or a maximum of ten years. Many consumers confuse the seven-year statute here. To clarify, Chapter 13s normally take three to five years to discharge — which is when the seven-year statute begins. This means most Chapter 13s remain on your credit reports for a full ten years.
• Released tax liens remain for seven years from the date released.
• Withdrawn tax liens will be removed as soon as the credit bureaus become aware of the withdrawal. Note: Withdrawals are not guaranteed and the IRS has said that liens must be paid in full for them to consider withdrawal requests.
• Unpaid tax liens can remain indefinitely.
• Student loans are treated like any other loan except when they go into default. The Fair Credit Reporting Act does not address the amount of time a defaulted Government backed student loan may remain on a credit file. That, however, is addressed by the Higher Education Act of 1965, which suggests that unpaid student loans can remain on credit files until they’re paid.
If you are seeking help on how to improve on your overall credit, let the credit professionals of InCreditable Advisors assist you today by calling us for a credit analysis at 317.202.1297. InCreditable Advisors is an experienced credit consulting company specializing in credit repair, debt settlement and credit education. Allow our 17 years of experience go to work for you and start building for a better tomorrow.