Credit History and Negative Marks

In the U.S., your credit history is extremely important. It can come into play for major applications like a mortgage or auto loan, and even for smaller things like signing up for a cell phone plan or applying for a credit card. In many cases, your credit history may be checked to determine whether you will be approved and what interest rate you will receive. Credit history is generally tracked by the three major U.S. credit bureaus, and your credit score is determined based on different scoring models and the information in your credit file.

Different items on your credit report affect your credit score differently. For example, making payments on time, having higher credit limits, and maintaining a longer credit history can all help raise your credit score. Once your score is higher, loans and credit cards are easier to get approved for, interest rates are generally lower, and credit card limits may be higher. So in general, you want to improve these factors as much as possible.

On the other hand, the following items can lower your score. Their impact on your credit score differs, and from lower to higher impact, they are:

  • Hard Inquiry: Applying for a new credit card or a new loan will usually trigger a pull on your credit report. The more hard inquiries you have, the more your score may drop. However, this type of record falls off relatively quickly and usually has a smaller impact.
  • Late Payment: If you forget to pay your credit card bill and it becomes more than 30 days late, the card issuer may report it to the credit bureaus. This kind of record can also lower your credit score, and the impact differs for 30-, 60-, and 90-day late payments.
  • Collection: If you leave debts unpaid for a long time, such as credit card bills or medical bills, the account may be sold to a professional collection agency. This kind of record has a major impact on your credit score and can remain for a long time. Even if you pay off the collection agency, the record will not disappear.
  • Bankruptcy: If you truly cannot repay your debts and collection agencies are also unable to recover money from you, you may choose to file for bankruptcy. A bankruptcy record will also appear on your credit report, and with this record, it will be very difficult to get approved for credit cards or loans in the short term.

Although a Hard Inquiry can lower your credit score, it is relatively common, so we generally do not refer to it as a negative mark. The other items are less common and have a much larger impact on your score, so we consider them negative marks on a credit report. To reduce their impact, you may need to remove or lessen these records through various methods in order to improve your credit score. We will explain this in more detail below. Note that some passive credit report checks do not have a negative impact, and only you can see them. For example, some credit card companies may periodically pull your report to decide whether it is worth sending you marketing offers.

In addition, if your SSN is stolen, your identity is stolen, or someone else uses your identity, negative items that do not belong to you may appear on your credit report. That will also lower your score. The solution is to contact the credit bureaus or ask a credit repair company for help, which we will also discuss below.

How to Find Them

Under U.S. laws related to credit reporting, consumers can get one free credit report each year from each credit bureau (Experian, Equifax, Transunion). So you can stagger the timing and request one from a different bureau every four months (before the end of 2022, reports could be obtained once per week, so this extra planning was unnecessary). The easiest way is, of course, to do it online. Specifically, you can go to the following website and follow the instructions to check your credit report.

Your credit report will clearly list your inquiry history, payment history, and whether you have any collection or bankruptcy records. You only need to review it line by line. The three bureaus' reports are broadly similar, but inquiry records may differ, because when you apply, the credit card issuer or bank may pull a report from a different bureau. If you are not familiar with how to read a credit report, you can refer to the detailed guide below.

In addition to getting free reports directly from the three credit bureaus, you can also use credit reports provided by some credit cards or third-party platforms. The overall content is similar to what the three bureaus provide. Also, if your credit score drops significantly, that is often a sign that an important item has appeared on your credit report.

Of course, if you have experienced identity theft, SSN theft, or similar issues, I recommend checking your credit report immediately (including via a paid service if necessary) and dealing with the issue as quickly as possible.

Records That Shouldn't Be There

In the internet age, personal data leaks have become more and more common. Your name, address, phone number, date of birth, and even your SSN can all be stolen. If someone has this information, they may be able to apply for a credit card or loan in your name. Once they get the card or the money, they will spend it, but the debt will be in your name. If you do not catch it in time, more and more problematic information may pile up on your credit report, and you may find it nearly impossible to get approved for a credit card or a loan.

Under the Fair Credit Reporting Act (FCRA), consumers have the right to view their credit reports and remove information that does not belong to them. You can contact the three credit bureaus by email, phone, or mail. This entire process is called a dispute. Before filing a dispute, you must first obtain a copy of your credit report using the methods described above. Ideally, you should get reports from all three bureaus, because if there is a problem, you may need to dispute it with all three.

In addition, sometimes because of a move or mailing issues, you may not receive bills sent by a hospital, landlord, or telecom company, which can also result in unpaid balances. If you can prove that you were not responsible for the charge, or that the other party's actions prevented you from paying, you can also dispute it. It is best to contact customer service first, or escalate to a higher-level support team to handle this kind of issue. You can also use services such as BBB or CFPB to help address it in advance.

Filing a Dispute Online

As an example, here is what the dispute process looks like with Experian. The other two credit bureaus are similar. On the support page, find the Disputes section.

You can choose to file a dispute online or by mail. You can also check the result of your dispute online.

For example, if you plan to dispute online, you will need to fill in your personal information.

Experian will verify your identity based on your personal information. If that does not work, you can upload an ID or call to verify your identity. If that still does not work, then you will have to dispute by mail.

Disputing by Mail

If you want to dispute by mail, that works too. Just make sure to include all supporting documents. Experian has a detailed PDF explaining what materials to include, and you can simply fill out its sample form. One important note: for all identity-verification and dispute materials, only send copies—never mail the originals!

Of course, you can also use a template directly and mail it to the addresses of the three credit bureaus. The template provided by the FTC is below:

[Date]

[Your Name]

[Your Address][Your City, State, Zip Code]

[Business Name]

[Street Address][City, State, Zip Code]

Subject: Disputing Information in Credit Report

I am writing to dispute the following information that your company supplied to [give the name of the credit bureau whose report has incorrect information]. I have circled the items I dispute on the attached copy of my credit report (s) .

This item [for instance: retailer account at ABC Department Store and the account number] is inaccurate [or incomplete] because [describe in detail what is inaccurate or incomplete and why] I am requesting that [business name] have the item removed [or request another specific change to correct the information.]

[Add list and description of other disputed items, if that applies.]

Enclosed are copies of [my credit report and any other documents enclosed with a short description, for instance, your record of payments made] supporting my request. Please reinvestigate this matter and contact the nationwide credit bureaus to have them delete [or correct] the disputed item (s) as soon as possible.

Sincerely,

[Your name]

Enclosures: [List what you are enclosing]

Follow Up on the Result

In general, a dispute takes about 30 days to process. If you submitted the dispute online, you can log in to your account to check the result. If you disputed by mail or by phone, you can usually track it using the case number.

If the negative item has been removed, it’s a good idea to pull your credit report again and confirm it. Also, if you’re planning to apply for a loan or credit card, it may be best to wait another month and make sure no new negative items that don’t belong to you appear before applying again, so you don’t waste a Hard Inquiry.

How to Handle Negative Marks

Hard Inquiry

  • Impact: Low
  • Duration: Two years
  • Can it be removed?: No, unless you dispute it

A Hard Inquiry generally can’t be removed. Usually, you just have to wait for the two-year reporting period to expire, after which it will automatically fall off your credit report and stop affecting you. Fortunately, one inquiry typically only lowers your credit score by about 2-3 points. If you want to reduce the impact of inquiries when applying for credit cards, one less common strategy is to apply for two credit cards from the same bank at once; in many cases, the Hard Inquiry may be combined.

Also, if you see an inquiry on your credit report but did not apply for a credit card or loan, you can follow the dispute steps described above.

Late Payment

  • Impact: Medium
  • Duration: Seven years
  • Can it be removed?: You can try contacting the bank

Late payments are actually fairly common, but credit card companies usually do not report them to the credit bureaus immediately. If you pay within 30 days, they generally won’t report it. If it goes beyond 30 days—or even 60 or 90 days—it will usually be reported to all three credit bureaus. The longer it goes unpaid, the more damage it can do to your credit score. So no matter what, make sure you at least pay the minimum due. At worst, you’ll pay interest on the remaining balance, but it won’t show up on your credit report and cause long-term damage.

So what if you really are 30 days late? My suggestion is to contact the bank proactively no matter how many days you missed. If you’ve had a history of paying on time, banks are often fairly understanding and may help within reason. For example, if the late payment has not yet been reported to the credit bureaus, they may let it go once you pay it off. And even if it has already been reported, there may still be some room to work with them if your explanation is reasonable—such as illness, being overseas, moving and not receiving the bill, and so on. In short, take the initiative and ask.

If it really can’t be removed, then unfortunately you’ll have to wait 7 years for the late payment to disappear. The 7-year period starts from the month you missed the payment, not from the date you eventually paid it off.

Collection

  • Impact: High
  • Duration: Seven years
  • Can it be removed?: Try negotiating with the collection agency

Hospitals, banks, dentists, and service providers can all send you bills. But if you keep not paying, they often don’t want to spend the time chasing you down or suing you. Instead, they may sell your debt at a discount to a specialized debt collector—that’s what we mean by a collection. These collection agencies buy your debt cheaply and then use their “professional” collection skills to recover the money, whether by calling you nonstop or negotiating a settlement. In any case, they want to get paid. If your debt is sold to a collection agency, the collector may report it to the credit bureaus. This kind of mark can hurt your credit score significantly, because by the time an account reaches collections, it often means you couldn’t even make the minimum payment and the debt has been outstanding for a long time.

That said, there is one advantage when dealing with collections: you may be able to negotiate. For example, an original $1,000 debt might be settled for a one-time payment of $500, or perhaps $700 paid in installments, depending on your negotiating skills. In addition, some agencies may offer pay to remove, meaning you can ask the collection agency to remove the collection item from your credit report in exchange for paying off the debt. Of course, even if they won’t remove it, a Paid Collection is still generally better than an unpaid one.

Some collection agencies will not agree to remove the record. In that case, even after you pay it off, the item may remain on your credit report for 7 years. Usually, that 7-year period starts from the date of the original delinquency—not the date the debt was sold to collections, and not the date you paid it off.

Bankruptcy

  • Impact: High
  • Duration: Seven years
  • Can it be removed?: No

If you have too much debt to pay off, you may be able to file for personal bankruptcy under current US law. Of course, a bankruptcy record will also stay on your credit report for 7 years. During those 7 years, it will be very difficult to get approved for loans or higher-end credit cards. However, you can consider some smaller banks’ cards designed for rebuild credit, as well as secured cards. Gradually building positive credit history can be very helpful for repairing your credit profile.

A bankruptcy record stays on your credit report for 7 years and, unless there is an error, it generally cannot be removed.

How to Rebuild Your Credit History

If you really do have negative marks on your credit report, how can you systematically rebuild your credit history? In fact, rebuilding credit is very similar to building credit from scratch, though the focus is a bit different. For someone just starting to build credit, opening a card and paying on time may be enough. But when rebuilding credit, your options are more limited, so we recommend following the steps below:

  • Open a checking account and get the corresponding bank’s secured card (for example, BofA)
  • Put down a deposit on the secured card and use it for purchases
  • Try to convert the secured card into a regular credit card
  • Apply for credit cards from smaller banks, such as store cards, which are generally easier to get approved for.
  • Make all payments on time

If you follow these steps for about 1-2 years, your credit should generally return to a somewhat normal state. Personally, I do not recommend trying to build credit by becoming an authorized user on someone else’s card, since it may affect the primary cardholder. Of course, during the rebuilding process, you should regularly check your credit reports and credit scores so you know where you stand.

Credit Repair Companies

If your credit history contains a large amount of information that does not belong to you, or if you are on the verge of bankruptcy and your credit report is a complete mess, and you also do not have the time or energy to keep dealing with it, you can choose a credit repair company to help handle these issues. Note that under the FCRA, only you have the right to address issues related to your credit reports. Third-party credit repair companies mainly help by contacting and following up with the credit bureaus for you, and by offering suggestions on how to improve your credit score.

Credit Saint is a relatively well-known credit repair company with multiple plans available. It can also help you file unlimited disputes with all three credit bureaus.