How Good and Bad Information Impacts Your Credit Score Rating, and for How Long

Your credit score (also called a credit rating) is a number that many creditors and lenders use to gauge your creditworthiness. They use your credit score to determine the likelihood that you’ll default on a credit card or loan. A high credit score indicates a low risk of default, while a low credit score means you’re more likely to default.

Credit score ratings are based on the information – both negative and positive – that’s available in your credit report. Information that’s not included in your credit report, like your income, isn’t used to calculate your credit score. There are five key things that impact your credit score: payment history, level of debt, age of credit, types of credit accounts, and recent applications for credit.

Negative information and your credit rating

Late payments including charged-off accounts, debt collections, bankruptcy, foreclosure, tax liens, and judgments all indicate a negative payment history. So how long does it take for your credit report to “heal” from these inflictions? Usually, seven years (but negative information hurts your credit the most during the first few years of occurring). But, as long as you add more positive information to your credit history, those old negative items will hurt less as time passes. When negative information falls off your credit report after seven years, it won’t influence your credit score at all. The instant that information is no longer available in your credit report, your credit score can’t use it.

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There are a couple of exceptions to the seven year rule for negative information being removed from your credit report. The first exception is for Chapter 7 bankruptcy. Unfortunately, the Fair Credit Reporting Act allows a Chapter 7 bankruptcy to remain on your credit report for up to 10 years. So, it can influence your credit score for that length of time. After 10 years, the bankruptcy will fall off your credit report and won’t be included in your credit score from that moment forward.

Another exception applies to credit report inquiries that are made whenever a business checks your credit report for an application you made. Inquiries remain on your credit report for two years, but are only included in your credit ratings for one. Inquiries only make up about 10% of your credit score, so they may not impact your score by much.

What about positive information?

The frequency that positive information is added to your credit report varies by the company providing the information. Most companies update your credit report on a monthly basis, so timely payments and credit card balance reductions should show up on your credit report within 30 days. Once the information’s there, it will be reflected in your credit report rating.

If information doesn’t automatically fall off your credit report by the time it’s supposed to, you can submit a credit report dispute to have the credit bureaus manually remove the old information.

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