How Positive and Negative Information Impacts Your Credit Score

A credit score is a number, from 350 to 850, used to track a consumer’s financial responsibility. The higher your score, the more likely you are to pay bills on time and responsibly mange your finances. Low credit scores are usually earned by missing payments, racking up credit card bills, or failing to pay bills completely. This is why lenders, employers, and landlords put so much importance on a person’s credit score.


What Information Impacts Credit Scores?

Many of your financial choices will affect your credit score. However, your credit score is not based on your income, how well you invest your money, or how much you have in the bank; it is mainly based on how responsibly you handle credit. This means whether you pay your bills and if you manage to do so on time.

Other factors that affect your score are the size of your debt, the type of accounts you own, how old your accounts are, and whether you have recently applied for new credit. When figuring your credit rating, the credit bureaus will take all of these things into consideration.


How Negative Information Affects My Credit Score

There are many different things that can negatively affect your credit score. Examples are late or missed payments, foreclosure, debt in collections, judgements, tax liens, and bankruptcy. If you fail to pay a debt, the account may show up as “charged-off” on your credit report. This does not mean that you no longer owe the debt. It just means that the company has chosen to write the account off as a loss for tax purposes. You will probably notice that the same account is currently in collections. You could ask yourself should I get my credit score?

A charged-off account will remain on your credit report for 7 years, plus the six months it was late before it was charged off. Most of the other negative information will also remain on your credit report for seven years. These negative reportings will lower your score the most in the beginning. Once they have been on your credit report for several years, they will stop having such a large impact. Once the 7 year period is up, they won’t affect your credit rating at all.

There are two exceptions to this seven year rule. If you file for Chapter 7 bankruptcy, this will be visible for 10 years. Also, anytime you apply for a credit card or loan, a company will access your credit report, which can negatively impact your score. Credit inquiries will remain on your credit report for two years, but will only affect your score for one.


How Positive Information Can Improve Your Credit

Positive information, like paying down a credit card or paying bills on time, will increase your score. Unfortunately, each time you make a payment, that information will not necessarily be added to your report. How often a creditor reports information to the credit bureaus depends on their schedule, but many do report monthly.

These positive changes will usually increase your score within 30 days of the reporting. So if you are working on improving your credit score, you will need to check your reports frequently. It’s also important to make sure that negative information disappears off of your credit report in a timely manner. If it does not, you will need to contact the credit bureaus to correct any inaccuracies in your reports.