There are some things in life you never want to see, like a worm in the apple you’re eating, or a pool of motor oil on the floor of your garage.
Some things you don’t ever want to see on your credit report, either. Here are five of them, and what you can do if they do show up on your report.
1. Bankruptcy – In this economy, more people are dealing with bankruptcy. There were more than 1.52 million U.S. bankruptcy filings in the 12 months leading up to June 30, 2011, according to www.uscourts.gov. If your best efforts to avoid it fail, bankruptcy will remain on your credit report for up to 10 years. Your best bet for bouncing back from bankruptcy is to start re-establishing your credit right away, following good credit management habits like paying bills on time and minimizing your use of revolving credit accounts.
2. Foreclosure – Home foreclosures are also up thanks to the country’s continuing economic challenges. If you’re not able to pay your mortgage, refinancing may be an option or you may choose a short sale (getting the bank to agree to let you sell the house for less than you owe on it). A foreclosure will stay on your credit report for 10 years and recovering from it requires the same kind of steps you would take to recover from a bankruptcy.
3. Tax liens – Fail to pay your property taxes, and you could lose your home even if you’re current on your mortgage. Your local, county or state government can put a lien on your house or other property for non-payment of taxes. If you pay the lien, it will drop off your credit report in 10 years. Unpaid liens linger for 15 years.
4. Charge offs – Miss a month or two of paying a bill and it will show up as a late payment. Miss six or more months and your creditor may decide you aren’t going to pay at all and report it as ‘charged off’ to the credit bureaus. This blemish stays on your credit report for seven years. Avoid it by paying on time, or if you can’t, by keeping in touch with the creditor and arranging a more manageable payment option.
5. Late payments – This one is easier to avoid than the other blots on this list. To keep late payments off your credit report, simply pay on time. If you have trouble remembering bills, many banks provide online services that will allow you to set up an automatic payment so that you’re never late.