How Old Debts Influence Your Current Credit Score
When you have a charge off or a negative report on your credit report, it stays there for seven years. It means that even when you pay a debt off in full that the mark will not be removed from your credit report. It can be frustrating when you are trying to clean up your report so that you can purchase a house or make any other big purchase. It is important to understand how your credit history affects your credit score, so you can improve your credit score.
Work to Pay Off Your Debts in Full
However, you should begin to pay off your debts, because your mortgage company will require you to do this if you plan on purchasing a house. It is better to pay off your debts in full when possible. Then you can request that the company changes your report to say paid in full next to the charge off or negative report. It will show the mortgage company that you were responsible when it comes to paying your obligations.
Consider Settling Your Debts
If you can’t pay in full, then you will need to settle your debt. The account will then say settled in full. It is little lower on the scale then paid in full, but it is better than not paying at all towards the debt. You can also dispute any debt that is not yours. It can be a long and difficult process. You may want to pull your credit reports a year before you plan on purchasing a house to make sure that everything is in order.
You should take the time to settle your debts yourself instead of using a debt settlement company. You can save a lot of money and headache if you will do it yourself, but you need to plan on how debt settlement will affect your taxes.
Focus on One Old Debt at a Time
When you begin to pay off old debts, you should pay them off one at a time.
If you try to pay a little to all of them, you may end up with the companies hounding you all the time. Simply call the company when you are ready to pay off one debt and take care of that one and then save up until you have enough money to address the next one. As you contact the companies request that they report that you have paid the debt to the credit agencies as soon as possible. You can often settle the debt for between twenty to fifty percent of what you originally owed. Beginning by offering less money than you have saved so you can negotiate with the bank. You will need to have the bank send you a letter stating that the payment will be considered as a settlement in full before you send in the money.
Establish a More Positive Recent Credit History
While you may not be able to remove all negative marks from your credit report, companies will look more closely at recent behavior than your older behavior. If you messed up six years ago, but are current on everything since then, it looks better than if you are currently late on some things. You may also consider going to a bank or a mortgage company that offers manual underwriting which may help to find a lower interest rate.
Give Yourself Time to Repair Your Credit
It will take time to clean up your credit report completely, especially if you had a period of time when you fell behind on all of your payments or if you stopped paying several credit cards.
If you do not recognize a debt from during that time period, you can contact the company and request more information about the debt. They should be able to provide the basic information for your loan and offer proof that you opened the account. If you did not do it, then you will need to treat the debt as identity theft and file a police report and deal with the company. It is a drawn-out process, but it can clean up your credit score.
Prevent This From Happening Again
If you are working to clean up your credit report, you should make sure that you do not end up in this situation again. You can do this by creating a budget, and limiting the amount that you borrow. Ideally, you should not use your credit cards and try to pay cash for your major purchases like a car. You need a good credit score to qualify for a mortgage.
Your credit report can also affect your job searches, so it should be a top priority to make sure you pay all of your debts on time and that you do not allow yourself to fall behind again. Your budget an emergency fund should help you stay on track.