Being in the real estate business, we know how important it is to have your credit score be as high as possible. You won’t be condemned to Hades for committing these seven deadly credit sins, but you’ll likely see your credit score fall. A good credit history and a high score can reduce the interest rate you pay on mortgages, credit cards and car loans.
How many consumers find errors when they check their credit reports? About 20 percent, according to a study by the Federal Trade Commission.
Have you committed any of these seven credit transgressions?
1. Paying late: You might think paying 30 days late isn’t a big deal. However, creditors and service companies report you as late when your payment is 30 days late. Although a single late payment won’t completely ruin your credit report, repeated 30 day late payments can stay on the report as a red flag for many years.
2. Collections: If a creditor refers your account to a collections agency that’s going to show up on your credit report. Even if you pay the collections company, this mistake can stay on your credit report for several years.
3. Public Recordings: Tax liens, judgments and bankruptcy have the potential to kill a credit rating. Judgments are valid for seven years whether they’re paid or not. Chapter 13 bankruptcy stays on your report for seven years, while a Chapter 7 bankruptcy lasts 10 years. An unpaid tax lien stays on your report for 15 years, a paid lien stays for seven years.
4. Charge Offs: At some point, most lenders who are not owed a significant amount of money may decide to charge off the debt if they feel they won’t be able to collect. Although the debt is listed as charged off, it will remain on a credit report for seven years.
5. Foreclosure: If you lose your home to foreclosure (or you sign a deed-in-lieu of foreclosure) the incident will remain on your credit report for seven years. If you can show there were special circumstances behind your foreclosure (like illness or job loss), you may be able to get another mortgage in three years.
6. Repossession: If your car is repossessed by your auto lender, you may still have a financial obligation. If the bank sells your car at auction for less than what you owe on the loan, you could owe the difference. Repossession leaves a negative mark on your credit report for seven years.
7. Settlements: Although settling a debt is one way of taking care of it, it’s not the most optimal way in the eyes of a creditor. If you owe a creditor $1,000 and you repay $500 in a settlement, the settlement will still leave a negative impact on your credit report and serve as a red flag to future potential creditors.