Negative Credit Information: It Won’t Last Forever!

While you can obtain a home mortgage loan without one, the credit score remains one of the most important factors for most buyers in the United States. In order to get an affordable loan, most buyers will need a good credit score. The higher your score goes, the more you can borrow and the less you’ll pay in interest.

There are many outside factors that go into a mortgage loan, but the credit score is one of the items that borrowers can control. You can’t change standard interest rates, you can’t control housing prices, and you can’t control market inventory. You can, however, control your credit.

Many people, unfortunately, have scores that are harmed by negative credit information. Bankruptcies, tax liens, and lawsuit judgements from years past can come back to haunt your financial future.

How long will negative credit information stay on a report? It all depends on the type, but some, if not addressed, can stay on the report indefinitely.

Negative Information on Credit Reports: How Long Does it Last?

False Information

If negative information is outright false, there is no wait; you can have it removed immediately. However, removing the information takes time, as you’ll have to file a dispute with any of the bureaus where the false data appears. This can be done over the phone, through mail, or online, and there will likely be a wait of at least 30 days. During this time, the agency will investigate the information, and if they can’t proove that the information is true, it will need to be removed.

The same principle applies to duplicate information and data that is outdated; contact the agency to have it removed immediately.

Tax Liens

If you owe the IRS for unpaid taxes, they can create what’s known as a “lien,” which is essentially a legal statement saying they have a right to your property until the tax obligation is fulfilled. This can be a significant burden on your credit score, and unlike a judgement for a private party, a tax lien will stay on your credit report indefinitely if it’s not paid.

Once the tax lien is paid, however, it can be removed in seven years. If you have set up a payment schedule, you may be able to start the clock on removing the tax-lien information from your report.

Credit Card Debt

Credit cards are often considered one of the best ways to boost your credit score. Use them wisely, don’t over-purchase, and pay them off each month, and you’ll steadily increase your credit score. However, if credit card debt is mismanaged and goes unpaid, it can cause significant problems for your financial stability and score.

As long as the credit card has a balance, it will be reported to the credit agencies. This information, either negative or positive, will stay on the report until the credit account has been inactive for seven years. Fortunately, if you have handled credit wisely and responsibly, the positive information can stay on your report for ten years.

Collections

Collections work slightly differently than other aspects we have already discussed. Collections, as opposed to judgements, liens, and credit-card debt, will remain for seven years, but will have a different impact on your overall credit report and score depending on the amount of time that the collecting company has been reporting the information.

If the collection was reported two years ago or less, it must be paid for the credit score to improve. However, if the collection was reported over two years ago, it will still have a negative impact on your credit score, even when paid and finalized.

Court judgements will stay on your report for seven years.

Legal Judgements

Say you are in a car accident with another driver who sues you and wins a judgement for damages. In order to qualify for a mortgage, you will likely need to settle any judgements against you. Once the judgement is filed, it will remain on your report for seven years, regardless of whether it is settled. The negative impact of the judgement, however, will actually decrease over time.

Even if a judgement is paid, it will still remain on your credit report for seven years. However, the credit report will be updated to show that you have settled the issue. A judgement that has been satisfied is still a negative mark on your credit, but it is far more favorable than an unpaid financial judgement on your report.

Bankruptcies

If you find yourself in financial trouble, with a long list of debts and the inability to pay them, you may need to resort to bankruptcy, which can have a significant effect on your credit score.

How long the bankruptcy remains on your credit report will depend on the type of bankruptcy. Bankruptcies are reported for ten years from the filing date, not the date of discharge. However, Chapter 13 bankruptcies, where you agree to pay some or all of the debt, can be removed in seven years. Chapter 7, however, which wipes out almost all unsecured, non-priority debt, will remain for ten years.

What Information is Not on Your Credit Report?

There is a lot of data and information that goes into a credit report, but not every last bit of information will be included. Criminal records, for example, are not an indication of financial stability and are not included on credit reports.

Income, which you might assume is included, is not. This is because credit score deals with how well you can handle debt, not how much you earn. For obvious reasons, lenders will want verification of your income, but this information is separate from your credit score. (It should be noted, there are plenty of high-income earners who are not great with debt.)

Increase You Chances of Approval with San Diego Purchase Loans

If you want more information on how you can improve your chances of getting a world-class mortgage loan, contact San Diego Purchase Loans today.

With a dedication to service and a common-sense approach to lending approval, we can help you get a loan that fits your needs, budget, and future goals.

Testimonials

“I must say I was extremely impressed with the professionalism and quick response from Chad Baker & his entire team. I screened over 5 lenders before selecting the Baker Team & boy am I happy customer. It’s evident that customer service is a priority for these folks.”

“Chad and his entire team were over the top amazing, professional, and attentive throughout the entire home loan/buying process. I could not have asked for a better team to have on my side through what could be one of the most challenging and stressful processes one experiences. From the first conversation I had with Chad, I felt comfortable with him. He helped guide us through the process without ever once making us feel uneasy, unimportant, or uninformed. I never felt silly or stupid for asking the same questions over and over until I fully understood what we were getting into, or until something made total sense to me. The home loan world is fast paced, overwhelming, and confusing, and Chad and his team held our hands and helped us to feel comfortable and confident about our choices. He and his team were always there for us day or evenings, weekdays, or weekend and never made you feel like you were a bother if you had a burning question you had to get answered at 8pm Saturday night. I will use them again and again, and suggest them to any friend, family, or acquaintance. Seriously, they are rock stars. They work hard for you to get you into your dream home, we could not be happier with their hard work, dedication, and kindness.”

Excellent customer service – highly recommended!. I was referred to Chad by one of my friend. During our initial meeting, Chad walked me through the lending process and provided multiple ideas to start the home search. He got me pre-approved in couple of days. After looking for months, we finally liked a house but it was over our budget. He came up with an intelligent financing strategy and provided an excellent rate that let us purchase our new house. Chad and his team are patient, professional and always available – literally 7 days a week, 24×7. I can’t remember the last company I worked with that returned calls and emails in such a timely manner! I will happily recommend him to others.”

I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for Cross Country Mortgage. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2019. Got a question for Chad? Call (858) 353-8331 or submit your question online