The effects of a negative credit history are far-reaching. It can keep you from borrowing money for a house or car, from getting a good insurance rate, and even from getting a job. With a negative credit history, you may need to pay security deposits on utilities, cell phone companies cannot give you a contract (and therefore no discounts on phones), and landlords can turn down your rental applications. You can turn your credit history, but it will not be easy.
What is a negative credit history?
Having a negative credit history means that you have several pieces of negative information on your credit report – a document that contains the details of your payment and account history with creditors and lenders.
Several things can hurt your credit, but a negative credit history is usually caused by serious delinquent accounts such as late payments, collections, charge-offs, repossession, foreclosure, judgments, tax liens, or bankruptcy on your credit report. These all come from missing payments on your accounts. One or two late payments alone will not lead to a negative credit history, but a number of late payments will, especially if you are late on different accounts within a short period of time.
With 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 to tell if you have a negative credit history
Checking your credit score is the best way to gauge your credit history. Your credit score is a three-digit number that classes the information in your credit report. The lower your credit score, the more negative your credit history is.
FICO scores – one of the most used versions of your credit score – range from 300 to 850. Scores at the bottom of the range, usually less than 650, indicate a negative credit history. The VantageScore is another type of credit score ranging from 501 to 990. The VantageScore gives a letter, similar to a school class, along with the credit score number making it easier to tell what your credit score means.
Your credit report is the second part of the investigation into a negative credit history because it is the document that the negative data is included. Many major credit card issuers also include your free credit score on your monthly bill. Keeping track of your credit score allows you to determine if you have a negative credit history.
Improve a negative credit history
Accurate negative information can remain on your credit report for up to seven years (or 10 years for bankruptcy). If the information blemishing your credit history is incorrect, you can have that information dispute removed with the credit bureau.
You might be able to remove negative things from your credit history with a pay-for-delete or letter goodwill. The first is a request to remove negative information in exchange for payment and the last is a request to remove negative items as a matter of goodwill. Companies do not need to remove accurate negative information from your credit report as long as these items are within the credit reporting time limit. Even paying a delinquent bill doesn’t change the fact that you were once delinquent.
The adage “Time heals all wounds,” true even with an injured credit history. As the negative information gets older, it will affect your credit score less. You can start to come for new credit cards and loans, but you may not get the best conditions on that. You may accept low limits and high interest rates until your negative credit history gets better. Use these accounts to prove you can handle credit and to add positive information to your credit history. It will help you improve your credit and qualify for much better bills in the future.