Wednesday, February 22, 2006

How Long Is Money You Owe on Your Credit Report?

Failing to pay money owed to your creditors or lenders can significantly hurt your credit score. Creditors and lenders regularly report delinquencies to the credit reporting bureaus, and this information serves as warning for future creditors. Stay current on your bills and pay monies owed to creditor to avoid credit damage and a lower credit score.

Types of Delinquencies

    Different types of delinquencies indicate failure to pay money owed to a creditor or lender. After several months of non-payment, creditors and lenders may update your credit information and include notations about your delinquent account. These notations can include accounts that are charged off or sent to collection; or creditors and lenders can go to court and request a judgment. A credit report full of delinquencies hurts your chances of qualifying for mortgage loans and auto loans; and if you are able to qualify, you can expect a much higher interest rate.

Length of Time

    Owing money to a creditor doesn't go away quickly. Avoid a delinquent account because this information stays on your personal credit report for seven years. Credit scores drop quickly after a creditor or lender updates your file with a delinquency, and it takes time to rebuild your credit score after a negative update. Owing money to a creditor not only reduces your FICO score, it can also negatively impact your employment options with a bank or another job that involves managing money or cash.

Satisfying Debt

    Paying old delinquencies is key to cleaning up your credit report and rebuilding your credit score. Credit repair is a gradual process, but with timely payments on current debts, and by paying down older debts, you can build a better score and slowly reverse the effects of delinquencies. Contact creditors, lenders or collection agencies handling your delinquent accounts and create an installment plan to satisfy your past-due balances.

Updating Credit Reports

    Updating credit reports with positive information can quickly add points to your credit score. Charge-offs, collection accounts and judgments don't immediately disappear upon paying a delinquent debt. But to improve your personal record, the removal of this information is imperative. Negotiate with creditors prior to mailing a payment and discuss removing the negative item from your report once you've paid the balance. Creditors aren't obligated to remove charge-offs and collection accounts but they might comply because you're taking the initiative to satisfy your debt. Get this agreement in writing before paying the debt.

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