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Negative Events & Your Credit Report

Your credit report gives creditors a comprehensive view of your financial status. It includes notations of the timely payments you have made and the loans you have paid in full, but it also includes notations of all negative financial events that have occurred in your life. This includes past due payments, defaults, lawsuits filed against you and bankruptcy filings.

Your credit score is critical to your financial life. The higher your credit score, the more likely you are to qualify for credit and to be granted a lower interest rate on your loans. Thus, it is important to closely monitor your credit score to ensure that it is accurate. If you discover errors, you should have them immediately corrected. To learn more, please read our blog titled "Post-Bankruptcy Credit."

Most people do not understand how long a negative event will remain on their credit report. Below are a few examples:

· Late payments on loans, credit card bills or other types of bills are noted on your report for 7 years.

· A Chapter 7 bankruptcy remains on your report for 10 years, while a Chapter 13 filing will be noted on it for 7 years.

· The foreclosure of your home will be noted on your report for 7 years.

· Most collections are noted for 7 years, but the time frame can vary depending on the debt being collected.

· Most public records are reported for 7 years, but unpaid tax liens can remain on your credit report indefinitely.

It is important to understand that the older each of these debts is, the less of an impact they will have on your credit score. Thus, a negative even that has been on your credit report for years will not damage your score as much as one that has been noted for only a few months. As a result, debtors who emerge from bankruptcy and begin working to improve their credit score can begin to see results in a shorter amount of time than they expect. Even though a bankruptcy filing still remains on their credit report, their score can improve.

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