Understanding Negative Items On Your Credit Report

Most financial sins stay in your credit report for a minimum of seven years

, but there are exceptions, and some items can fester there even longer. Lets take a closer look at the various items and their longevity on your credit report.

Things that generally remain for seven years include:

(1) Charge offs. This type of debt is deemed uncollectible by the creditor. This usually occurs when the debtor has fallen seriously behind with his payments, generally about six months.

(2) Defaults on student loans. This happens when you stop honoring the repayment agreement for a certain period of time, generally 270 days. This is a pretty serious offense that could make it difficult for you to have the ability to borrow again. Dont despair! This doesnt mean that you are totally doomed. You just have to bring your payments up to date and the loan back into good standing. The key to this is communication! Keep your lender in the loop and work out some sort of arrangement instead of ignoring them altogether. Remember how frustrated you become when your calls get unreturned or your kids completely tune you out.

(3) Lawsuits and judgments. When someone sues you for money (lender, creditor, debt collector, attorney or another third party) and the court orders you to pay, that is known as a judgment. Each state has its own statute of limitations on debt, which is a limit on the amount of time you can be sued for a debt. In Colorado, for example, it is six years. You can check the statute of limitations for your state by performing a search.

(4) Tax liens. A tax lien is what the government (federal, state or local) puts on your property if you are delinquent on your taxes. This means that your property is held as collateral until you repay your taxes.

(5) Foreclosures and Short Sales. While a foreclosure remains in your credit report for seven years, a short sale disappears from your report much sooner. A short sale takes place when you sell your home for less than your mortgage balance. It may be listed on your credit report for three to five years, depending on how your lender reports the transaction.

There are some items that will stay on your credit report for more than seven years. Bankruptcy and unpaid tax liens both remain on your credit report for more than seven years. Bankruptcy remains for 10 years from the date filed, and any unpaid tax liens will remain on your credit report for 15 years.

Dont let unfortunate circumstances and poor decisions haunt you! While you may have made credit missteps of your own, make sure you are not blamed for the mistakes of others. Its important to monitor your credit report on a regular basis and dispute any inaccurate information. Think of your credit report as a reflection of who you are; it can say a lot about your character. If you want to be known as a stand up person who takes responsibility for your actions and delivers on a promise, then commit to maintaining a good credit report.

by: Denisa Tova, MBA, CFP,CDFA, ChFC, CLU

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