| Many creditors and lenders use your credit score | | | | who have a bad financial past? No! As time marches |
| (commonly called a credit rating) to know how | | | | on, those credit "baddies" will have less and less of an |
| creditworthy you are. Your credit score predicts how | | | | impact on your rating. In the meantime, you should |
| likely you are to simply stop paying your credit card | | | | work on improving your credit history by making |
| bills and other loans. A good credit score is a high | | | | on-time payments. As you add positive credit history |
| three-digit number (usually 700 or above), while a bad | | | | to your reports and your negative history fades into |
| score is a low three-digit number (600 or below). A | | | | the background, your credit score will rise up! |
| low score means you have not done a good job in the | | | | After seven years, most negative credit history must |
| past of meeting your debt obligations, and therefore | | | | legally drop from your report altogether. Once poor |
| are unlikely to pay your future debt obligations. Lenders | | | | credit items are no longer a part of your report, they |
| are not as likely to lend to someone with a bad credit | | | | can no longer affect your credit score in any way. |
| score. You can change your financial fate by | | | | Not everything is legally required to drop from your |
| increasing your score, primarily through making on-time | | | | report in seven years, though. There are two major |
| payments on your current debts. | | | | exceptions to that rule: Chapter 11 and 13 bankruptcies |
| So where does the information that determines your | | | | can stay on your report and affect your score for up |
| credit score ratings come from? Your credit history is | | | | to 10 years. An unpaid tax lien can stay on your report |
| recorded on what's called your credit report. Both | | | | forever. Despite these exceptions, many credit |
| positive and negative information is recorded on your | | | | bureaus will "be nice" and drop the bankruptcies and |
| report. This information is then fed through a calculation | | | | unpaid liens from your credit report after seven years. |
| (which varies by credit bureau or lender) and | | | | Inquiries, or "credit checks" as they are more |
| generates a three-digit number, usually on a scale from | | | | commonly called, can legally only affect your credit |
| 300-850. The main pieces of information that affect | | | | score for up to one year. These credit checks |
| your report rating are your history of payments, how | | | | account for about 10% of your score, so don't stress |
| much debt you have, and how much credit you have | | | | too much about them. |
| applied for recently. | | | | If you notice negative information on your report for |
| Negative credit history and your credit rating | | | | longer than it is legally supposed to be there, you can |
| The inclusion of negative information on your credit | | | | file what's called a dispute. For instance, if you see a |
| report will bring down your credit score. If you have | | | | delinquent payment older than seven years listed on |
| any of the following on your credit report, your credit | | | | your credit report, contact the bureau that issued the |
| ratings are likely to suffer: | | | | report to contest the information. Usually, they will |
| Late payments | | | | remove outdated or inaccurate information within 45 |
| Charged-off accounts | | | | days. |
| Debt collection accounts | | | | Positive credit history and your credit rating |
| Bankruptcy | | | | In most cases, each month that you pay your credit |
| Foreclosure | | | | card or other loan on time, it will be reported to the |
| Tax liens | | | | credit bureaus and recorded as positive history on |
| Court judgments | | | | your credit report. A history of on-time payments will |
| So is obtaining a good credit score hopeless for those | | | | be factored into your score, helping to make it higher. |