When you’re balancing a hectic job and a busy household, it’s easier than you think to let a payment slip through the cracks. Many people believe that delinquency is wiped from a credit report once the delinquent account has been paid off, but unfortunately, that’s not the case.
The effects of a delinquent account
When you pay late or find yourself on the receiving end of debt collection, those incidents may remain part of your credit history for up to 10 years, according to Julie Bruning, Vice President of Consumer Lending at Cobalt Credit Union.
“Your payment history represents 35% of your credit score,” she says. “The decisions you make now could impact you for years into the future. That’s why it’s so important to pay attention to good credit habits now, and one of those is to pay bills on time.”
Typically, negative information lingers on a credit report for seven years, although it can be a shorter amount of time. For really large credit hits, like bankruptcy, the info may remain on your report for 10 years.
What can you do?
Those rough patches don’t have to define you, credit-wise. Here are some steps that can help wipe your slate clean:
- Pay off your loans and revolving debt. Once you pay off loans or credit cards, they’re marked as “paid” on your report, which is considered an advantage and usually increases your credit score.
- Watch how you use your credit. Your “credit availability to credit usage” ratio is also a major factor for lenders when considering your credit status.
- Always try to pay on time. If your payments have all been on time in the years since your account delinquency, lenders will see that you’ve improved your habits considerably, and they’ll take that into consideration when determining loan interest rates.
Recovering from payment missteps takes time. Just remember that it pays to stay on top of payment schedules, and to talk to an advisor if you’re struggling to make payments on time.
Determining your credit ratio
Your “credit availability to credit usage” ratio is determined by looking at how much credit you have available versus how much you’re using. For example, if you max out every credit card, it reflects negatively in your report because you have very little credit availability, even if your credit limits are high.
Learn more about what goes into your credit score with our free e-book.