To receive a better credit score this year, we suggest you see to it that your annual credit report does not contain any of the following items, which are probably the CAUSE of your low credit score:
- Charge-offs. What are these items? These are credit card accounts and loans, which have been written off by your creditors. They did this because they realized that the time, effort, and resources they will invest in collecting payments from you would be time wasted. They have exhausted all their collections effort.
But wait, don’t celebrate because they have stopped calling. This is a big read flag to other creditors that if they lend you money, you will not pay it back. No matter how many times they call or send letters. In fact, having a lot of charged off accounts will make prospective lenders decline you. No matter what kind of story you have as to why you didn’t pay.
- Debt collection accounts. Do you have a lot of collection accounts in your credit files? If you do then it means that your creditor has decided to sell your account to a debt collection agency. This means the creditor has tried all they can to get you to pay. So they will hire another company to try to get you to pay. Again – another big red flag to prospective lenders to stay away!
- Public record information, such as foreclosure, bankruptcy, tax liens and even court judgments. But what does each item mean?
Foreclosure: foreclosure happens when a bank or a creditor seizes your home, sells it, and uses the proceeds to settle your financial obligation.
Tax liens: are actually penalties you will incur for not paying your property taxes in full. The federal government can repossess your valuable assets and sell them in public auctions to recover enough funds that it can use to settle all your unpaid taxes.
Bankruptcy, on the other hand, shows that your credit problems has gone from bad to worst – leaving you with no choice but to discharge them completely for you to attain a fresh start. This is one of the most terrible entries you could have in your credit file as it can stay in your report for as long as seven years.
Court judgments: represent the legal actions that your creditors may take against you, especially if you cannot keep up with your financial obligations.
- Fraudulent or unauthorized charges made on your credit accounts, without your knowledge. After all, a lot of hackers and even fraudsters today are working double time to gain access to your personal and credit information. And once they succeed, they might make huge charges on your accounts and leave you with a huge financial obligation.
This is why we encourage our readers to pay close attention to their credit reports. And be sure to report cases of credit fraud and identity theft to the major credit bureaus.
- Incorrect or outdated information in your credit and payment history. Watch out for inaccuracies in your payment and credit transactions. Make sure all your payments are being reported correctly. After all, these entries can also compromise your good credit standing and affect your likelihood of being granted affordable credit deals, in the coming months.
Its best to avoid having these items in your credit reports. Practice good credit habits. And if you run into a difficult situation, always take the initiative to talk to your creditors and negotiate for a more flexible payment plan.
About the Author
Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair Guide and Building Ebook. NHBS also has a list of recommended bad credit credit cards.