The effects of a negative credit history are far-reaching. It can prevent you from borrowing money for a home or car, getting a good insurance rate, and even getting a job. With a negative credit history, you could pay utility bills, cell phone companies can’t contract you (and therefore no discounts on cell phones), and landlords can refuse your rental applications. You can flip you credit history, but it won’t be easy.
What is a negative credit history?
A negative credit history means that you have several pieces of negative information about your credit report – a document that contains details of your payment and account transactions with creditors and lenders.
Several things can hurt your credit, but a negative credit history is most often caused by overdue accounts such as late payments, debt collection, loading, repossession, foreclosure, judgments, liens, or bankruptcy on your credit report. These all come from missing payments to accounts. One or two late payments alone will not have a negative credit history, but some late payments will be, especially if you are late on several different accounts within a short period of time.
Having high balances on credit cards and loans, compared to your credit limit or original loan amount can also lead to a negative credit history.
How do you tell if you have a negative credit history?
Your credit score check is the best way to measure your credit history. Your credit score is a three-digit number, the number marks the information in your credit report. Lower the credit score, the more negative your credit history is.
FICO Scores – one of the most common versions of your credit score – range from 300 to 850. The rating is based on the lower end of the range, usually below 650, showing a negative credit history. The Vantages is another type of credit score that ranges from 501 to 990. The Vantages a letter degree, similar to a school grade, along with the credit score number makes it easier to tell what your credit score means.
Your credit report is the second part to examine a negative credit history because it is the document that contains the negative details. Consumers in the US are entitled to a free credit report every year. Many major credit card companies also include your free credit score on your monthly statement. The overview of your credit score can help you assess whether you have a negative credit history.
Improving Negative Credit History
Exact negative details can remain on your credit report for up to seven years (or 10 years of bankruptcy). If the information blemishing history of your credit is inaccurate, you can dispute this information with the credit bureau to have it removed.
You could delete negative things from your credit history with a pay-for-delete or company letter. The former is a request to remove negative information in exchange for payment and the latter is a request to remove negative items as a matter of goodwill. Businesses don’t have to remove negative information from your credit report exactly as long as these items are within the credit reporting period. Even a delinquent account doesn’t change the fact that you were delinquent once.
The saying “time heals all wounds” is also true with a wounded credit history. As the negative information gets older, it will impact your credit score less. You can start to qualify for new credit cards and loans, but you cannot get the best terms on those. You can accept low limits and high interest rates until your negative credit history gets better and better. Use these accounts to show you can process credit and add positive information to your credit history. It will help you improve your credit and qualify for many better accounts in the future.