You’ve decided to start looking into buying a new home, but your lender drops the bomb that your credit report may affect your interest rate or even the possibility of obtaining a home loan.
How long will the negative information stay on your credit report? What can you do about it?
Here is a basic breakdown of how long negative information will remain on your credit report:
Late payment and collections account will generally remain on your credit report for approximately 7 years from the date of first delinquency, possibly even if you’ve paid off said accounts.
Foreclosures, judgments, and public record items will remain on your credit report for about 7 years. However, unpaid tax liens can remain much longer.
Completed Chapter 13 bankruptcies will remain on your credit report for 7 years, and Chapter 7 bankruptcies will stay for 10 years.
The older the item, the less impact it will have on your overall credit score.
If you or your lender pulled your credit report, and you find a negative item that you believe is incorrect, you can dispute this information with the credit reporting agencies. They will investigate the item and research it by contacting the creditor listed on the report to verify its accuracy.
Make sure you pay any outstanding accounts and/or judgments. Sometimes, creditors may be willing to remove negative information if you negotiate with them. This isn’t always the case, and they aren’t required to remove the information, even if the account is paid. However, you may still want to contact them and discuss your options.
While you are attempting to repair your credit, it is important to avoid opening any new credit accounts or obtaining any new debt. Focus on the current accounts that need to be paid.
A negative item on a credit report doesn’t automatically mean you can’t obtain a home loan. Discuss your options with your lender.