It is a terrible feeling to see a negative item on your credit report. This can lower your credit score as well as your self-esteem.
But rest assured knowing that there is a light at the end of this tunnel. Whether you have a collection account or a bankruptcy, it ends up falling out of your report.
So let’s see how long some of the most common mistakes stay on your credit report.
How long do inquiries stay on your credit report?
There are two types of surveys: hard surveys and soft surveys. Inquiries have no impact on your credit score. An example of an indirect investigation is when you check your own credit. Another common indirect request is when a credit card issuer checks your credit to see if you qualify for a pre-approved offer.
But difficult investigations are another story. When you apply for credit, the lender examines your credit report in detail, and this is called a full investigation.
A serious investigation usually takes two to five points off your credit score. It’s for each demand. Most credit scores give you a break if you’re shopping around for a mortgage and there are multiple inquiries over a short period of time.
Credit ratings are set to recognize when you review your purchases and count it as one request. But if you apply for, say, five credit cards in a month, that’s five different applications. You could maybe have 10 to 25 points off your score. You can see how multiple inquiries could lower your score enough to turn a good score into a fair credit score.
Inquiries stay on your report for up to two years. But after the first year, there is less of an impact on your score.
How long do late payments stay on your credit report?
A late payment stays on your credit report for seven years. This is where it really hurts: Even after you pay the overdue bill, it stays on your report for seven years from the original date of the delinquency.
For example, if you had a late payment in June 2020, the late payment disappears from your credit report in June 2027. Your payment history makes up a whopping 35% of your FICO score. A 30-day late payment could lower an excellent FICO score by around 100 points. The higher your score, the greater the drop.
Don’t let this happen to you. Set up email or text reminders so you don’t miss the due date. If you’re late, pay your bill as soon as you can. If you don’t, your account could be sold to a collection agency.
If you are in a financial crisis, call your lender and explain your situation. If your money problems are linked to the COVID-19 pandemic, you may be able to embark on a hardship plan. The worst thing you can do? Nothing. Take action before you miss a payment.
How long do collection accounts stay on your credit report?
When your creditor abandons you, usually after a delay of at least 120 days, your account may be sold to a collection agency. The agency then reports the collection account to the credit bureaus.
Collection accounts can come from a variety of things, not just credit cards. It could be due to a medical bill that you didn’t pay because you were waiting for the insurance to pass. Or maybe you just didn’t have the money. Even a long overdue utility bill could end up on your credit report if you’re not careful.
Here’s the basic answer: A collection account stays on your report for about seven years and six months. The timeline begins on the original default date, which is the first day after you missed a payment and never updated your account. The extra six months is because the debt is usually six months old when it is sold to a debt collector and shows up on your credit report.
Unfortunately, you will also see your original creditor’s written off account on your credit report. So those are two negative things about your report.
If you pay off the account within the 7 1/2 year period, it still remains on your report. But the negative impact on your score decreases over time. For example, a collection account has the most impact on your score in the first two years. After that, the effects of the collection account are less damaging. The further you move away from the error, the more your score will bounce.
Do credit scores weigh the same on all collection accounts?
Medical collection accounts are sometimes treated differently, but the impact on your score depends on the version used when a lender requests your credit score. One of the more recent scores, FICO Score 9, does not include paid collection accounts. And it weighs less on unpaid medical collection accounts than other types of collection accounts. The problem? The FICO Score 9 is not yet widely used.
Another recent addition, the VantageScore 4.0, does not include medical collection accounts that are less than six months old. But it is not yet widely used either.
So, the effect of having a medical collection account on your credit report depends on the score used. The lender makes the decision on which score to use, so it’s out of your control. But no matter how it is handled by a credit score, a collection account that is listed as paid looks better to a potential lender who reviews your credit report.
How long does bankruptcy stay on your credit report?
The duration of a bankruptcy rest on your credit report depends on the type of bankruptcy. A Chapter 7 bankruptcy stays on your report for 10 years. And a Chapter 13 bankruptcy stays on your report for seven years.
Chapter 7 bankruptcies last longer because most of your unsecured debt is discharged. With a Chapter 13 bankruptcy, you still pay off your debt and some is discharged. Thus, the penalty for a Chapter 13 bankruptcy is lighter.
After the first two years, your bankruptcy will have less of an impact on your score. Your score will drop like a rock at first, but be patient and you and your credit score will get over it.
How long do other negative items stay on your credit report?
Other negative items, for example, foreclosures and repossessions, stay on your report for seven years.
Foreclosures occur when your mortgage is 60 to 90 days past due. You will receive a default notice in the mail. Take this very seriously because you could lose your home. Likewise, your car could be taken back in the event of late payment.
Civil judgments and tax liens used to appear on your credit report as public documents, but credit bureaus no longer list them. A tax lien had the potential to dramatically lower your score, so this is good news for consumers dealing with liens. But remember, even if it doesn’t show up on your credit report, you still have to pay for the lien.
Your credit score will improve
I know it is horrible to have these negative items on your credit report. But this is one of those times when you just have to wait two years. After that, your score will start to improve.
Now, during this time, you also need to be fully responsible for your other bills, otherwise your score might even get worse. As mentioned, payment history is very important for just about all versions of credit scores. It is the very basis for having good credit, after all.
OK, you screwed up, but it’s time to move on. Do a good job with your finances from now on, and you’ll find yourself long before those missteps even hit your credit report.