The 5 Worst Credit Report Entries That Can Ruin Your Score

It's easy to make mistakes when it comes to your credit. Some mistakes are so detrimental that you'd never want them to appear on your credit report. These mistakes hurt your credit score and your chances of getting approved for credit cards and loans. Worse, negative information can stay on your credit report for seven years, or 10 years with a Chapter 7 bankruptcy.

Do what you can to avoid having these negative entries added to your credit report. For example, be proactive about contacting your creditors if you anticipate having trouble keeping up with your payments. Many creditors are willing to work with you if you contact them before you fall behind. They might be willing to waive a payment, let you pay late without a late fee, or change your due date.

Charge-Offs

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Missing your payments for four to six months or more could cause your creditor to charge-off your account. A charge-off is when credit card issuers write off your debt as uncollectible. Your account is closed, but you still owe the debt, and the creditor could still pursue you for the balance owed.

Charged-off accounts remain on your credit report for seven years from the date the account is first delinquent. In other words, it's seven years from your first missed payment. If you pay off the debt after it's charged off, it will be listed on your credit report as a paid charge-off. It will still stay on your report for seven years, but it may have less of an impact on your score if it's paid.

Debt Collections

Not only will creditors charge-off your account after a period of non-payment, but they may also hire a third-party debt collector to attempt to collect payment from you.

Many debt collectors report the collection account on your credit report, adding another negative entry. The collection will stay on your credit report for seven years, even after you pay it off. Fortunately, when you pay a collection, the account is updated to show that you paid in full, so it does a little less damage to your score.

Bankruptcy

Filing for bankruptcy allows you to legally remove liability for some or all of your debts, depending on the type of bankruptcy you file. Your credit report will reflect each of the accounts you included in your bankruptcy. Even though the bankruptcy information will remain on your credit report for seven to 10 years, you can sometimes begin rebuilding your credit soon after your debts have been discharged.

Foreclosure

If you default on your mortgage, your lender will repossess your home and auction it off to recover the amount of the mortgage. This process is known as foreclosure. When your home is foreclosed, it can severely damage your credit, limiting your ability to obtain new credit in the future. A foreclosure will remain on your credit report for seven years. Some lenders don't offer home loans to those who have past foreclosures, so it could hurt your ability to buy a home even after it stops impacting your credit.

Repossession

Repossession happens when you default on your auto loan payments and the lender has to take possession of your car. You can be as little as a few days late on your payments and the lender can begin the repossession process. If a repossession lands on your credit report, it will remain for seven years.

While tax liens, lawsuits, and judgments used to impact your credit score, they no longer do. Tax liens are when you owe back taxes on a property or to the IRS. Creditors and debt collectors can file lawsuits to collect delinquent debt, and they can be awarded a judgment.

When this information was allowed on credit reports, it was often incorrect. For example, someone who had a tax lien and the same name as you could have their record attached to your report. It was often difficult to get the information corrected. Today, bankruptcies are the only public record information that appears on credit reports.

Article Sources

  1. Equifax. "What Is a Charge-Off?" Accessed Oct. 11, 2020.

  2. Experian. "Collections on Your Credit Report." Accessed Oct. 11, 2020.

  3. Experian. "How to Remove Bankruptcy From Credit Report." Accessed Oct. 11, 2020.

  4. Experian. "How Long Does a Foreclosure Stay on Your Credit Report?" Accessed Oct. 11, 2020.

  5. Experian. "How Long Does It Take for a Repossession To Come off Your Credit?" Accessed Oct. 11, 2020.

  6. Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Oct. 11, 2020.

  7. Experian. "Judgments No Longer Included on a Credit Report." Accessed Oct. 11, 2020.