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Types of Negative Reports

There are certain negative reports that can harm your credit rating. If you ask, everybody will like to have a good credit score. But having a good credit score cannot be achieved by mere wishes or talk. Talk is cheap. You will need to take some conscious steps before you can have a good credit rating. There are things to do. Also, there are things you should not do. In this article, the focus will be more on what not to do or allow to happen. If you allow any of them to happen, it will definitely ding your credit rating. If you plan to access a loan in the near future, avoiding them will be to your advantage.

Before I go into the main thrust of the article, you need to understand some things. For instance, if you apply for a loan, lenders will like to assess your creditworthiness. They want to know if you will be able to pay back the loan. No lender wants to give out a loan to somebody who will default in payments. Lenders will not rely on your promises that you are going to pay. Even if you ask any ardent loan defaulter, he will promise not to default. One way that lenders use to assess your creditworthiness is by digging into your credit history. They do this by requesting for your credit report from the credit bureaus. The information in your credit report will form a basis for determining whether you are creditworthy or not.

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Therefore, there are certain information that you should not allow to appear in your credit report. They have damaging effects on your credit rating. These are discussed below:

• Late payments: If you carry balance on your card, it may not necessarily affect your credit score. If the balance is considerably low compared to your credit limit, you may be fine with it. But if you have high balances on credit cards and loans, compared to your credit limit or original loan amount, your credit score will be affected. However, no matter how small your balance may be, your card provider or lender expect that you make at least minimum payment at the end of each month. Therefore, your monthly payment becomes a monthly routine for you which you should not miss. If you miss your minimum payment at the end of the month, even though you pay later, it will be regarded as a late payment. This will attract a late payment fee. Besides, if your lender report the late payment to the credit bureaus, it will lower your credit score by some points. Furthermore, the late payment will remain in your credit report up to seven years. It may take two years before your credit score recovers from the effects of late payment.
• Debt collections: If you fall back on the payments of your loan or credit card balance, your lender may sent the loan to collection. There are agencies that specialize on recovering debts on delinquent accounts. They usually charge fee for their services. So, if you default in loan payment and the debt is passed to collection, it will appear in your credit report. Collection accounts also stay in your credit report for seven years from the original delinquent date of the original loan. If you have collection account in your credit report, expect your credit score to drop significantly. The level of drop in points that you may experience will depend on how high your credit score is. However, you can remove collection account from your credit report is you are able to dispute it successfully.
• Charge-offs: If you have missed your payment for several months say like six months or more, your creditor may stop chasing you. He may decide to write the loan off from his books. However, this does not mean that you are no longer owing the debt amount. You still have the responsibility to pay. When your debt is charged off, your creditor will report the charge off to the credit rating agencies. Remember that the same debt must have been reported as late payment and possibly as a collection account. Reporting it as a charge off will further damage your credit rating. A charge off account can remain on your credit report for seven years from the first date your missed payment was first reported to the credit bureaus.

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• Repossession: If you have an auto loan which you have missed the payment, the lender can repossess the car without giving you a prior notice. Yes, this is possible. It is possible that the lender has secured a permission from a court. A repossession have the capacity of damaging your credit. In fact, it will be listed in the public records. Repossession also stays seven years in your credit report. But if you are prompt in the payment of your other debts, the effects of it on your credit score will fade out over a period of two years
• Foreclosure: Foreclosure is similar to repossession. But in this case, it applies to mortgage. If you default in your mortgage payments, the lender has the right to sell your mortgaged home in order to recover his loan balance. When this happens, you have forfeited your rights to the home. Your credit score will also drop significantly. This alone can disqualify you from getting another mortgage. A foreclosure entry appears on a credit report for seven years, but its impact on your credit score will decrease as time passes.
• Judgments: Judgments are one of the factors that can cause your credit score to drop. Judgments are nasty items to have on your credit report as they can cause problems whether or not they are paid. It is not the amount involved that matters. If it is a negative judgment, it will lower your credit score significantly. Judgments will stay on your credit report for seven to ten years from the date it was filed, whether you pay it or not. The time frame that it will remain depends on the statute of limitations in your state. Judgments impact your credit the most during the first two years they are reported. They will gradually diminish over time until they fall off after the statute of limitations runs out.
• Tax liens: If you refused to pay your tax, government can file a tax lien against you. This can remain in your credit report as long as the tax remains unpaid. However, if it is paid, it will remain on your credit report for seven years from the date it was filed. A tax lien can be an indication to lenders that you will not be a good borrower
• Bankruptcy: If you think that filing a bankruptcy is the way out of your indebtedness, you better have a rethink. Bankruptcy will stay up to ten years on your credit report.

All the above are negative reports that you should not allow on your credit report. They all have damaging effects.

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