Understanding Credit

Factors that can affect your credit score adversely. Delinquencies remain on your credit report for seven years. Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 15 years.


  • Chapter 7 is a complete liquidation of assets to settle all debts owed to creditors. This bankruptcy remains on your credit report for 10 years from the date it was filed, but can be disputed.
  • Chapter 13 is a reorganization of debt. Until this debt is paid for, dismissed, or discharged, the bankruptcy will reappear on your credit report (when disputed) as you make each payment over time.

Judgments, Tax Liens, & Student Loans

Regardless of what we accomplish with the credit report, you are still obligated to pay these debts. If you do not pay tax liens or student loans, the government can garnish your wages and take your taxes.

Credit Counseling Debt Consolidation

Although an item associated with credit counseling can be disputed, until you are finished with a credit counseling program, you will not be able to get a loan.

Repossessions, Charge-offs, Collections, & Late Payments

All of these negative items can be disputed and resolved on your credit report if they are not verified as reporting correctly on your credit report.


Inquiries remain on your credit report for 2 years and cannot be disputed.

Improving your credit score

Paying your bills on time is the single most important contributor to a good credit score. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should minimize outstanding debt, avoid overextending yourself and applying for credit needlessly.

In general, a score may improve, if you:

  • Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.
  • Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix - it probably won't raise your score.
  • Pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
  • Close accounts you don't need. A high total credit limit may signal potential overextension. A total of three or four cards -- including gasoline or department store cards -- is usually good.
  • Keep balances low on credit cards and other "revolving credit." High outstanding debt can affect a score. Try to keep your total account balance below 30% of your total available credit. For instance, if your cards have a total credit limit of $2,000, keep your total balance under $600.
  • Correct any incorrect information that might appear on your credit report.
  • Minimize the number of inquiries on your credit report. Don't apply for multiple credit cards over a short period of time, or for a card you're not likely to get.

Rebuilding Damaged Credit

Bad credit can happen to good people. Don't despair. There are ways you can get your credit back in shape. But you have to start working on it today -- and keep working hard to show potential creditors that you're serious about getting your credit back in order. As you do so, your credit score will improve, resulting in better credit offers and a substantial savings in money. With patience and timely repayments, you'll likely be able to build a new credit history that creditors will look upon favorably when making decisions about your ability to handle even more credit.

  • If your credit is severely damaged, or you have a very short credit history, apply for a gasoline credit card, a department store card, or a secured credit card. Use the cards, and pay the balances on time.
  • Use your new accounts in moderation. And make payments that are more than the minimum. You can keep a small balance so that your positive payment history will continue to show up on your credit report.
  • Keep your balances low. Avoid carrying a balance that is more than 30% of your credit limit (creditors may view it as excessive debt that you may not be able to stay current with).
  • Consider asking for help. If you can't qualify on your own, ask a friend or family member to cosign for a small loan or credit card. If you can stay current on a major credit card account or small auto loan, this will speed up the process of re-establishing good credit on your own.

* Information provided by Experian and Equifax.