How to Avoid the Worst Credit Report Entries

You don’t have to let your entire credit history go down the drain just because you have a few late payments on your credit report. It’s easier to recover from just one significant blunder – like a credit card charge-off or debt collection – than it is to have your entire credit history trashed by mounds of negative information. These are some of the worst credit report entries that you should try to avoid.

Foreclosure

Foreclosure is another really bad credit report entry that has affected millions of homeowners in the past few years. The reason foreclosure looks so bad on your credit report is because a mortgage is a really big loan. For many people, a mortgage is the biggest loan they’ll ever borrow in their lives. The other drawback of having foreclosure on your credit report is that you’ll have trouble buying a new home for several years. The good news is that, with the right actions, you can take out a new mortgage even before the foreclosure falls off your credit report.

Vehicle Repossession

If you default on your auto loan, the lender may repossess your vehicle. What qualifies as default varies from one lender to the next and is often based on state law. Your loan contract will include the details you need to know about when your vehicle will be repossessed. Since auto loan payments are so high, it’s best to try to make them every month. When you miss a payment one month, the next month both payments are due. Chances are, you won’t be able to afford the double payment and so you stay behind.

Judgment

By the time a creditor gets a judgment from you, they’ve probably exhausted all other collection tactics. A judgment looks bad on your credit report because you couldn’t (or wouldn’t) work out a deal to keep the account from going to court. Of course, there are times when creditors or collectors hide the lawsuit from you to make it easier to get a judgment against you, but that doesn’t make it look better on your credit report.

Tax Lien

A tax lien goes on your credit report when you haven’t paid your taxes. County, state, and federal tax debts can all end up on your credit report. The other downside about a tax lien is that you may not be able to sell property as long as the lien stands. You might also have your wages garnished or bank account levied to pay the tax lien. The IRS will seize any tax refund you have due until the tax lien is completely repaid.

Stay on Top of Your Finances

You can avoid many of these negative credit report entries – even if you can’t afford to pay right away – by staying in contact with your creditor or lender. Let them know you’re having financial trouble and ask for a reduced or suspended payment. You’d be surprised at how many creditors are willing to work with you, but if you ignore your debts, you’re only hurting yourself.

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