If you have seen (or heard) the recent commercials about getting a free credit report, then you know it’s important to have good credit and to monitor your credit line. This is the only permanent record that you need ever be worried about. Having a negative credit report can affect your borrowing ability, your interest rates, and even your employment.
The good news is that if you have negative credit, all is not lost. This record is not really permanent. Most of the bad information will be removed from your credit history after seven years from the last infractions. This is why it is so important to manage and care for your credit history. Although mistakes can be repaired, it will take at least seven years to make those repairs.
Late payments on any loans or rotating credit will be a negative mark on your credit history. Make a point to pay your debts on time. If that is a problem for you because of organization then pay your bills early. Before you go to talk to a lender you want to have at least a year’s worth of on time payments so they can see the new trend in your finances.
There are times when you get behind on the payments and work out a payoff arrangement with credit card companies or store cards. This is a smart thing for you to do in the long run (but only if you cut up the cards and don’t get any more credit lines), but it could be a negative strain on your credit history in the short run. Settlements of any kind will put a mark on your credit history.
Bankruptcy is definitely a negative on your credit history. It is one of the few negative financial situations that could remain in your credit history for more than seven years. Keep in mind that this is the picture the lenders are looking at to see how reliable you are at paying your debts. Chapter 13 bankruptcies will remain on your history for seven years, but a Chapter 7 bankruptcy (where you don’t have to pay money back) will remain for ten years.
Having a negative credit history could mean adding 3 or 4 percentage points to any loans that you might be interested in getting. It could mean that you will be turned down altogether. What you do right now with your credit can affect your financial situation for seven (or even up to ten) years. Take care that you don’t do damage to something so valuable.