Late Payments
Late payments occur when you are 30 days, 60 days, or 90 days late on a payment. Although you don’t want late payments on your credit reports, a 30- or 60-day delay isn’t too serious.
However, you do not want numerous late payments, nor do you want late payments on every account.
A recent late payment on a single account can reduce a score by 15 to 40 points while skipping one payment cycle for all accounts in the same month can reduce a score by 150 points or more.
Payments that are 90 days or more late begin to count more heavily on your credit score, and successive late payments are worse for your score since each following late payment is weighted more harshly.
Creditors will sometimes record payments as late as 120 days, which can be nearly as bad as charge-offs and collections. Late payments can be submitted to credit bureaus if they are more than 30 days late on an account, and they can remain on your credit reports for up to seven years.
Charge offs
When a creditor writes off your unpaid debt, this is referred to as a charge off. This usually happens when you have been late on an account for 180 days.
Charge-offs have a significant negative influence on your credit and, like most other derogatory items, can remain on your credit reports for up to seven years.
When you charge off an account, your creditor may sell it to collection agencies, which is even worse for your credit.
Creditors view a charge off as a clear indication that you have not been financially sound in the past and cannot be relied on to meet your financial responsibilities in the future.
When creditors discover a charge off on your credit record, they are more likely to decline any new loan or credit line applications because they regard you as a financial risk.
If you do qualify, your interest rates may rise. Current creditors may retaliate by increasing interest rates on outstanding balances.
Repossession
Repossession is the loss of property as a result of a secured loan. Secured loans are those in which you have collateral, such as a car or a house, and the loss happens when the lender repossesses the property due to inability to pay.
When this happens, the lender would normally auction off the collateral to satisfy the remaining sum, however, this does not always happen. A repossession usually follows a string of late payments and can devastate a credit score significantly.
Bankruptcy
Bankruptcy has a significant negative impact on credit. People who file for bankruptcy have too much debt and insufficient funds to pay it. They have most likely had outstanding debts for a long time, as well as loss of income that prevents them from paying any of their debts.
Bankruptcies can also result from significant medical debt. Debts are discharged when a bankruptcy petition is filed, and the individuals submitting are relieved of the majority of their previously acquired debts (there are some exceptions).
This option can provide people with a “clean slate” from debt, but creditors dislike seeing it on credit reports since it can imply that a person will not pay their bills.
Foreclosure
When a homeowner is unable to make payments, a mortgage lender will commence a foreclosure procedure. When a homeowner is three months or more behind on mortgage payments, a lender will often file for foreclosure.
If a foreclosure occurs and a homeowner is unable to make up missed payments, they are evicted from their home, and the foreclosure is reported to credit bureaus.
Collections
The most typical sorts of accounts on credit reports are collections. A collection account is held by almost one-third of all Americans with credit reports.
More than half of these accounts are for medical bills, but other accounts, such as outstanding credit cards and loans, utilities, and parking fines, can also be sold to collections.
Collections occur from debts that the original creditor sells to third parties if a bill stays unpaid for an extended period of time.
They have a significant negative influence on your credit and can remain on your credit reports for up to seven years. When potential creditors notice collections on your credit reports, it might raise red flags and lead them to believe you will not pay your debts.
