NEGATIVE ITEMS

  

Consumers with bad credit usually have one or more negative items reporting to their credit reports. These negative items can stay on your credit for seven years. When a borrower is overdue on a payment it is considered delinquent or late. This doesn’t mean it’s in default. Default means the borrower’s has missed several payments over a period verses missing a scheduled payment.


The difference between a collection and charge-off is really just the accounting. When a company can’t collect on a debt for a period of time they charge it off the books. Then it will report on your credit as a charge off account but if the company sells the debt to a third party collection agency it will report on your credit as a collection account. Paying off a collection may not increase your credit score, but it can help your debt to income ratio. If you believe there are collection accounts reporting in error we can assist you in repairing your credit by challenging those unverifiable accounts. Removing these accounts will increase your score. 


If you’ve been sued by a creditor you most likely have a judgement against you if you ignored the lawsuit or didn’t respond. A judgement is a court order decided in a lawsuit and gives the collector abilities to collect on the debt by garnishments, putting a lien on your home, and more. Each state has a statute of limitations for unpaid debt and you’ll learn more about that in Your Rights section. Judgments may not be reporting on your credit reports because of the policy changes that took place removing many tax liens and civil judgments from consumers credit reports last year. Many consumers were not aware they had judgements because of the change until they applied for a mortgage or apartment. Other changes included preventing the addition of medical debt to credit reports until 180 days after the account is reported.


Bankruptcy can help you relieve or pay off past debt but your credit scores will take major hit. Chapter 7 bankruptcy can stay on your credit for 10 years from the filing date. This particular bankruptcy is a liquidation bankruptcy that will wipe out your unsecured debt such as credit cards and medical bills but you must qualify by meeting the income requirements by passing the Means Test. 


A bankruptcy trustee is assigned to your case and their job is to sell your nonexempt property to help pay off some debt. With Chapter 13 bankruptcy it can report on your credit for 7 years and is designed for debtors to make monthly payments towards their debts through a repayment plan. Chapter 13 is for debtors who don’t qualify for Chapter 7.

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EMPLOYMENT

  

Some employers will check your credit reports and you may wonder what does your credit have to do with your ability to perform job duties? Employers may pull credit before hiring an applicant to determine if they are in financial distress. These companies are checking your credit report, not your credit score. One reason they check credit is to prevent theft or fraud. If a job candidate has high debts or late payments, the company could suggest that the applicant will steal funds to pay off personal debts. Another way to look at the situation is if a job candidate isn’t responsible with their own financial situation, how can they advise a customer?


Most employers hiring for banking, accounting, insurance, and many other financial positions will conduct a credit check. The applicant must consent to credit check before the employer can do so. With most of these positions requiring the candidate to handle sensitive information, the employer wants to make sure the candidate can be trusted and not tempted take pertinent information for personal financial gain.


Government jobs and the U.S. military enlistment also require credit checks. If you’re thinking about enlisting you may want to consider having your finances in order. If your credit report shows a bad credit history it can effect enlistment along with security clearance eligibility that could make most jobs unavailable to you. According to thebalancecareers.com the Air Force recruits are subject to the 40 percent rule, which means any recruit who’s monthly consumer debts exceeds 40 percent of his or her anticipated military pay is ineligible for enlistment. For the Navy, they consider total indebtedness rather than monthly payments. The recruits debt obligations that exceed half of the annual salary of the pay grade can prevent enlistment. The Marines use the same financial eligibility determination forms as the Navy but only does a financial eligibility determination when the individual requires a dependency waiver, and the Army works the same way as the Marines. 

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DIVORCE

  

Marital status isn’t a factor of your credit score but there are ways it can affect your credit. If you’re in the process of getting a divorce you want to make sure neither of the following occur:


Joint Accounts- You may have joint accounts reporting on both of your credit reports already. The problem that could occur is if the judge rules for your ex-spouse to pay for some or all of these accounts such as credit cards, mortgage, car, etc. after the divorce and they don’t make payment or pay late this will report negative items to your credit history and potentially drop your score. The fact that it will affect their credit also may be enough motivation for them to pay.


Unable to pay- The truth of the matter is some spouses lost their income after divorcing and can no longer afford to keep up with their monthly obligations. You may have spent a great amount of money on attorney fees or your spouse was the primary financial provider. If that were the case, then you could potentially start using your credit cards to supplement the missing income. The problem with this is your credit card utilization will increase and you most likely can’t afford to pay them down. 


Access to accounts- If your ex-spouse is an authorized user on any accounts, it may be a good idea to remove them immediately. The last thing you would want is to have an angry ex-spouse rack up debt in your name purposely. They are not liable for the payment because they aren’t the primary account holder. If this occurs and you’re unable to pay the debt, it will hurt your credit. 

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