No one wants a lousy credit score. It will impact your credit card bill, your car loan and your mortgage payment. Sometimes having a good credit score isn’t necessarily about what you do, but rather what you don’t do. Here are two things that utterly destroy your credit score.
Maybe you couldn’t pay that store credit card and eventually they stopped calling. Well that debt didn’t go away. They never go away. But, out of nowhere, sometimes years after you forgot about that bill, you get a collection notice. The bad news is a collection notice can really affect your credit score. Collection notices will stay on your record for up to 7 years from the date of origination. In other words, that’s 7 years from when the collection agency first purchased your debt and reported it.
The good news is if you’ve just recently received a collections notice, you might be able to negotiate to keep it off your credit history. A number of collection agencies will offer you this deal: pay the amount off in full when you contact them, usually within 30 days of the notice, and they won’t report it to your credit record. If you can’t pay the full amount off, talk to them, and see what you can do to keep the collection off your credit history.
When the credit agencies determine your credit score they are attempting to answer the following question: Will this person pay back their loan in a timely manner. The best way of knowing that is to see if you have paid back previous debts in a timely manner. Having a history of making late payments scream irresponsibility and risk.
If you’re trying to improve your credit score, then every late payment you have from here on out just undoes everything you’re trying to improve. A late payment will drop your score drastically in the first several months after it. The good news is that the impact of a late payment on your record decreases with time.
If you are late, it’s better to be 30 days late than 90 days late (or more). There is a difference. If you can limit your late payment to the equivalent of one missed payment, it looks better to lenders than showing you went 3 months without making a payment. Even if a 90 day late payment is legitimate, like you were in the hospital, lenders aren’t going to factor the reason in. They don’t care.
A history of late payments hurts your credit score too. It shows lenders you’re having trouble keeping things together, and if you’re missing payments now, then whatever credit they extend you will also have missed payments. Stop this now. Use automatic payments if you have to, but get those late payments under control.