As you probably already know, your credit report is a valuable asset to your financial future and freedom. It contains such information which holds you responsible for your spending habits and likelihood of paying bills on time. Not only does your credit report play a major part on being approved for basic necessities such as a cell phone, and even cable; but it also determines your ability to qualify for a home loan, auto loan, and even just a rental home!
So what happens if a negative remark is made to an account reporting to the bureaus?
If an account is reporting a negative item such as a charge off, late payment, non payment, loan defaults, hard inquiries, collection accounts, etc., then your credit score is most likely not at its fullest potential. Credit reports are designed to give a thorough profile of current, as well as past accounts. With that being said, paying past negative debts will not remove them from your report. However, paying your bills on time (or early) is the best way to keep in good standing with all of your creditors and keep your credit score and report squeaky clean.
How long does that negative information report?
Lengths of reporting time depends on what information is being reported.
Hard inquiries (which account for 10% of your FICO score) will report for no more then 2 years. To maintain a healthy credit score, make sure to limit how many new lines of credit you apply for.
Collection Accounts stay on your credit report for 7 years (starting from 180 days from the date the account became delinquent) and are not removed regardless whether they were paid. It is important to never pay a delinquent account or even speak to a third party collector before consulting a professional first.
Credit Accounts that have fallen into delinquency remain for 7 years from the first date the account was reported late (payment history accounts for 35% of your FICO score). If the account becomes closed, all of the account information including positive and negative will be erased after that 7 years. However, if that account remains open, only the negative marks will be removed, and the positive will report indefinitely. Keeping your credit accounts open, and with a low balance will maintain and may even increase your credit score.
Public Records such as bankruptcy, tax liens, or even judgements are (personal) information that become visible to the public, and remain visible depending on the account reported.
Completed chapter 13 bankruptcy will be removed after 7 years from the filed date, where as chapter 7, 11, and 12 will remain for 10 years from filed date. Paid tax liens typically report for 7 years from filed date, but can remain infinitely if unpaid. Paid judgements remain for 7 years regardless paid or unpaid.
Investing in credit monitoring and utilizing the services can help protect you from misinformation being reported, as well as keep you informed on what lenders will see of your past financial history. We always recommend signing up for credit monitoring.
