As awareness grows about the importance of maintaining a high credit score, there are still plenty of myths and uncertainties about how long negatives remain on your credit reports, and how these in turn affect your Fico score. The simple fact is that Fico do make this information available to the public, which should clarify any uncertainty you have about how long late payments and other negatives continue to count against you.
It is important to understand that the most recent negative information will have a greater impact on your score dropping, yet over time the negatives can be replaced by consistent positive financial practice. Thus although a completed chapter 7 bankruptcy will remain on your credit records for 10 years, over time it will have less relevance than more current information which shows responsible practice.
A chapter 13 bankruptcy will remain on your credit report for 7 years, as will foreclosures and debt collection activity. Late or missed payments of public record will also on your credit reports for 7 years.
If you were to file for bankruptcy tomorrow it would have a much greater detrimental effect on your credit score than if you were to undergo a foreclosure, although both would impact negatively. As a bankruptcy assumes a greater number of accounts being in default than a foreclosure you should expect your credit score to plummet more.
Negatives do not all have the same impact value and your credit score will suffer most from a bankruptcy, then a foreclosure. Settling a credit card debt for less than the amount owed in full will have a detrimental effect on your score, and this is often something which debt consolidation agencies advocate for their clients, although it is not an astute score move. A delinquent payment of more than 30 days is the next on the line to lower your Fico score, followed by maxing out your credit card which does not cause as big a drop to your score at the other negatives.
Over time each of these falls can be reversed by using credit responsibly and the Fico scoring system appreciates most those who carry small balances which they pay off in full on a monthly basis. By following this practice and not living on credit as such, your Fico score should increasingly improve, plus your income won’t be wasted on paying interest charges.
A poor or bad credit score is not irrevocable if you can demonstrate consistent use of credit in a positive way, and gradually this will lessen the importance of any negatives on file.