Bad Credit Listings: They're NOT All Created Equal
As mentioned previously, negative listings on your credit report are the biggest factor in lowering the credit score. If you're out to improve your credit score, any "negatives" on your three credit reports are definitely "job one." But, not every negative listing impacts your credit score the same. We'll list them all and rate them one-by-one on the same ten-point scale we used before with 10 being the most severe.
Level of Importance: 10 out of 10
Tax liens, judgments, and of course bankruptcies are full-blooded credit-killers. They are the nuclear devices of credit devastation. When you read that bad credit stays with you for "seven to ten years," the "ten years" part refers to public records. That's the bad news. The good news is that the credit scoring models don't really know how to read public records very well. Since public records are all listed differently and since this information comes from county courthouses all over the nation, there's very little consistency between these records. For the most part, these records are simply text fields that the scoring model must somehow "read." Also, public records must be pulled down by hand by the credit bureaus. This is difficult, error-prone and expensive. In short, there are many holes in the public record reporting system and most of these inefficiencies lean to the consumer's favor. But ANY kind of public record must be made to disappear (even paid judgments, paid liens etc.). (Saying much more on this subject will lead you down the path toward becoming an "expert," and we've already decided that you'd rather learn wakeboarding or crochet then become one of those. So, we'll just stop here.)
Level of Importance: 9 out of 10
Collection accounts are similar to public records in that they're reported hit and miss by collection agencies. Each agency is less interested in accurate reporting than they are in twisting the consumer's arm by trashing their credit rating. Collection agencies, in short, are more interested in getting paid than they are in the accuracy of the credit system. So, collection accounts are often inaccurate -- but the collection agency has a vested interest in keeping an active collection account from dropping off the report. But, since they're so focused on profit, collection agencies are often willing to delete a negative credit listing themselves, given the proper financial incentive. Paid collection accounts are just as bad to a credit score as unpaid collection accounts, but paid collection accounts are better because they're easier to remove through efforts to dispute and remove.
Level of Importance: 9 out of 10
These kinds of "charge off" listings are devastating to the credit score, especially when applying for a mortgage. Much like a charge off or collection account, a foreclosure/repossession not only damages the score, but it's very difficult to remove by contacting the creditor.
Recent Late Payments
Level of Importance: 8 out of 10
The more recent a black mark is on the credit report, the more damage it does to the credit score. And, the more recent negative listings that appear, the worse they impact the score too. For example, one thirty-day late pay will certainly ravage the credit score, causing it to plunge considerably. But, that's nothing compared to a series of late payments, all recent. If you show that you are "crashing," your credit score will crash too.
Late Payments - 90 to 120 days late
Level of Importance: 7 out of 10
Thirty day late payments, in small numbers, aren't as damaging as 90 and 120 day late payments. The later you were, the harder it will...
Credit Revolution: Path of the Smart Consumer 2007 John C. Heath, Esq., Dr. Randy Padawer, Jayson R. Orvis. All Rights Reserved. Published by Far Cliffs Multimedia, LLC