December 10, 2019

negative on credit report

Your credit report not only provides your credit score, but also your credit history. Lenders will often take a look at your credit report to determine how financially responsible you are. Things like late payments and missed payments help lenders identify potential lending risks. Not only can certain blemishes hurt your chances of having a loan approved, even if you are approved, it can hurt your terms. Fortunately, the blemishes on your credit report aren’t permanent.

How Far Back Does Your Credit History Go?

Any financial mistakes that you’ve made, from late payments to bankruptcies, will appear on your credit report and will remain there for years. Most delinquencies will remain on your credit report for as long as seven years, while more serious matters, such as bankruptcies, will remain for a decade. These blemishes can also do some serious damage to your credit score. This can be problematic, especially if you have blemishes on your report that occurred outside of your control. For example, expensive medical costs that resulted in the need to file bankruptcy.

Fortunately, there are ways to deal with such blemishes. First of all, while they can really hurt your credit score at first, they will gradually have less and less of an impact as the years go by. For example, if you had a 680 credit score and you were forced to declare bankruptcy, your credit score can take a 150 point hit. However, as long as you manage to maintain your finances, you can regain that 680 credit score within as little as five years.

Best Ways to Improve Your Credit Score

Although certain blemishes on your credit report can give lenders pause, you can offset these issues by having a good credit score. This shows that even though you might have had some financial issues in the past, you are now in a better financial position, which means you’re less of a financial risk to lenders. The following are some of the best ways to improve your credit score:

  1. Pay bills on time. – Simply paying your bills on time can help boost your credit score. Consider placing your bills on automatic payments. This way, you’ll never have to worry about forgetting to make a payment or making your payments late.
  2. Pay down your credit card debt. – One of the major factors of a credit score is your credit utilization ratio. If your balances are too high, it will hurt your credit score. Because of this, pay down your credit cards as much as possible. Generally speaking, try to keep your credit utilization ratio at 30 percent or less.
  3. Don’t close credit cards you pay off. – You might think closing an account is wise as it will prevent you from spending; however, when you close a credit card account, you remove credit, which will increase your credit utilization ratio.
  4. Don’t open new accounts. – Only open new accounts as needed. New accounts result in multiple inquiries, which ding your score.
  5. Dispute inaccuracies. – Credit reports aren’t always 100 percent accurate. You can request a free credit report from one of the three major credit bureaus once a year. Go through your report and look for any issues. There may be some mistakes on your credit report that are hurting your score. Reporting these mistakes can lead to their removal, thereby improving your score.

Despite the fact that negative information will remain on your credit report for some time, you can still improve your credit score. For more information on how you can improve your financial situation, contact us today.

photo of Jeff Mohlman

By Jeff Mohlman

Jeffrey has developed a comprehensive network of financial planning and estate planning experts who work for their client’s short-term and long-term goals. Today, the approach he incorporates for his clients follows three basic tenets: 1) being debt-free, 2) maximizing after-tax retirement income, and 3) protecting their estate from unforeseen risks.