7 Red Flags on Your Credit Report

If you’re struggling with debt and just trying to make ends meet, remember the consequences of stopping payments or starting foreclosure or bankruptcy proceedings. After all, the last thing you want to do is compound your debt issues with credit problems, as this will only make your financial life more stressful. Take a good look at your budget and cut back wherever possible to avoid any of these 7 red flags on your credit file.1. Late PaymentsNo one is perfect, and most of us miss a due date every now and then. Still, late payments will remain on your credit file for up to 7 years, so it’s important to avoid them at all costs. If possible, you should pay more than the minimum due, but it’s more important for your credit report to show a strong history of on-time payments than lower balances.There are many ways to avoid late payments on your credit accounts, such as:• Setting up reminders on your calendar or smart phone,• Sending payments as soon as you receive your statement, or• Signing up for email alerts from your lender to remind you when bills are due.2. Charge-OffsCreditors may charge-off your account if you are 180 days or more past due. Lenders do this because it helps them qualify for a tax exemption on the debt you owe that you aren’t paying back, but you are still legally responsible for the balance until the statute of limitations runs out. In Illinois, the statute of limitations on open-ended accounts like credit card debt is 5 years without a written contract, but the state doesn’t have a specific limitation on open accounts. That means creditors can still pursue collection action against you once your account is charged off. This status will remain on your credit report for 7 years.3. ForeclosureMillions of Americans have been forced into foreclosure over the last few years, and foreclosure can devastate you in more ways than one. Along with being forced out of your house, this red mark will remain on your credit report for 7 years and make it difficult to qualify for a new home loan or any other type of credit for some time.4. BankruptcyBankruptcy definitely has its benefits, as it allows you to wipe away most of your debts and start fresh. While there are many types of debts that may be included in a bankruptcy, including home and auto loans and credit cards, many debts won’t qualify, including federal income tax debt and student loans. Sometimes bankruptcy is the best option, but it will remain on your credit report for 7 to 10 years.5. CollectionsIf your account has been charged off, your creditors may continue attempts to collect the debt on their own, or they could sell your debt to a collection agency. Debt collection activity will stay on your file for 7 years.6. Lawsuits or JudgmentsWhile it’s not common, creditors have the right to sue borrowers for debt that’s outstanding. Not only does this information stay on your credit file for 7 years, a judgment will require you to pay the debt.7. Tax LiensIf you fail to pay taxes, you’re almost certain to get hit with a tax lien. This information will remain on your credit file for 7 years, and this time period doesn’t even begin until you pay the lien! If you never pay the taxes or make an arrangement to settle, it will stay on your credit report indefinitely!If you’re trying to rebuild credit or keep it spotless, it’s important to monitor your credit reports regularly. You can request a free copy of your credit report from all three bureaus (Experian, TransUnion and Equifax) once every 12 months through AnnualCreditReport.com. You can choose to receive them all at once, or you can stagger them every 4 months to get a broad idea of your credit more often.If you find any of these red flags on your credit report, don’t give up hope. Rebuilding your credit is possible, no matter how bad it is, but it takes patience, initiative, information and hard work.