Your credit report is a vital financial document that significantly impacts your ability to secure loans, rent an apartment, and even get a job. A poor credit history can limit your options and increase your interest rates. Lexington Law is a well-known credit repair company that assists individuals in challenging inaccurate, unfair, or unsubstantiated negative items on their credit reports. But what exactly *are* these negative items, and how can Lexington Law help?
Understanding Negative Credit Items
Negative items are pieces of information on your credit report that indicate a history of missed or late payments, unpaid debts, or other financial problems. These items can lower your credit score and make it harder to obtain credit in the future. Understanding these items is the first step toward repairing your credit.
It's crucial to regularly check your credit reports from all three major credit bureaus: Experian, Equifax, and TransUnion. You can obtain a free copy of your credit report from each bureau annually at AnnualCreditReport.com.
Common Types of Negative Credit Items
Several types of negative items can appear on your credit report. Here’s a breakdown of some of the most common ones:
Late Payments
One of the most prevalent negative items is a late payment. If you fail to make a payment on time – usually 30 days or more past the due date – the creditor may report this to the credit bureaus. The severity of the impact on your credit score typically increases with the length of the delinquency. A 30-day late payment will usually have less impact than a 90-day late payment.
How Late Payments Impact Your Credit: Late payments can significantly lower your credit score, especially if they are recent. The more late payments you have, and the more recent they are, the more damaging they are to your score.
Charge-Offs
A charge-off occurs when a creditor writes off a debt as a loss, typically after several months of non-payment (usually around 180 days). While the creditor may charge off the debt, you are still legally obligated to pay it. The charge-off will remain on your credit report for seven years from the date of the first delinquency that led to the charge-off.
How Charge-Offs Impact Your Credit: Charge-offs are considered very negative. They indicate to lenders that you have failed to repay a debt and are a significant risk.
Collections Accounts
When a creditor is unable to collect a debt, they may sell it to a collection agency. The collection agency will then attempt to recover the debt from you. Collection accounts appear on your credit report and can significantly lower your credit score.
How Collections Accounts Impact Your Credit: Like charge-offs, collection accounts are a strong negative indicator. They remain on your credit report for seven years from the date of the first delinquency with the original creditor, even if the debt is later sold to multiple collection agencies.
Bankruptcies
Bankruptcy is a legal process in which a person or business declares their inability to repay their debts. There are different types of bankruptcy, such as Chapter 7 and Chapter 13, each with its own set of rules and consequences.
How Bankruptcies Impact Your Credit: Bankruptcy is one of the most severe negative items. Chapter 7 bankruptcy remains on your credit report for 10 years, while Chapter 13 bankruptcy stays for 7 years from the filing date. Bankruptcy can severely damage your credit score and make it difficult to obtain credit for many years.
Foreclosures
Foreclosure is the legal process by which a lender repossesses a property because the borrower has failed to make mortgage payments. This is a significant financial setback and has a substantial negative impact on your credit.
How Foreclosures Impact Your Credit: Foreclosures remain on your credit report for seven years from the date of the first delinquency. They can significantly lower your credit score and make it challenging to obtain future mortgages.
Repossessions
Repossession occurs when a lender seizes property, such as a car, because the borrower has failed to make payments. Like foreclosures, repossessions are a significant negative item.
How Repossessions Impact Your Credit: Repossessions stay on your credit report for seven years from the date of the first delinquency. They can severely damage your credit score and make it difficult to obtain future loans.
Judgments
A judgment is a court order that requires you to pay a debt. This can happen if a creditor sues you for unpaid debt and wins the case.
How Judgments Impact Your Credit: Previously, judgments stayed on your credit report for up to seven years or until the statute of limitations expired, whichever was longer. However, in recent years, the major credit bureaus have removed most public record data, including civil judgments, due to difficulty in verifying the information. If a judgment appears, ensure its accuracy.
Tax Liens
A tax lien is a legal claim by the government against your property for unpaid taxes. Similar to judgments, tax liens used to be a common negative item. However, due to changes in reporting practices, many tax liens have been removed from credit reports. If a tax lien is on your report, ensure it's accurate and up-to-date.
How Tax Liens Impact Your Credit: Like judgments, the impact of tax liens has diminished due to reporting changes. Verify its accuracy.
Inquiries
A credit inquiry occurs when a lender or other entity checks your credit report. There are two types of inquiries: hard inquiries and soft inquiries. Hard inquiries, which result from applying for credit, can slightly lower your credit score. Soft inquiries, such as when you check your own credit report or when a creditor pre-approves you for a credit card, do not affect your score.
How Inquiries Impact Your Credit: A single hard inquiry has a minimal impact. However, multiple hard inquiries in a short period can indicate to lenders that you are desperately seeking credit, which may lower your score.
How Lexington Law Can Help
Lexington Law assists clients in challenging inaccurate, unfair, and unsubstantiated negative items on their credit reports. Their process typically involves:
- Credit Report Analysis: Lexington Law analyzes your credit reports from all three major credit bureaus to identify negative items that may be inaccurate, unfair, or unsubstantiated.
- Dispute Letters: They prepare and send dispute letters to the credit bureaus and creditors on your behalf, challenging the negative items.
- Follow-Up: Lexington Law follows up with the credit bureaus and creditors to ensure they investigate the disputes and provide responses.
- Escalation: If the initial disputes are unsuccessful, Lexington Law may escalate the disputes by sending additional letters and providing supporting documentation.
- Personalized Strategy: They develop a personalized credit repair strategy based on your individual circumstances and goals.
It's important to note that Lexington Law cannot guarantee the removal of all negative items. However, they can help you assert your rights under the Fair Credit Reporting Act (FCRA) to ensure the information on your credit report is accurate and fair.
Benefits of Credit Repair with Lexington Law
- Improved Credit Score: Removing inaccurate or unfair negative items can lead to an improved credit score.
- Increased Credit Options: A better credit score can open up more credit options, such as lower interest rates on loans and credit cards.
- Reduced Financial Stress: Repairing your credit can reduce financial stress and improve your overall financial well-being.
- Expert Guidance: Lexington Law provides expert guidance and support throughout the credit repair process.
Considerations Before Hiring Lexington Law
While Lexington Law can be a valuable resource, it's essential to consider the following before hiring them:
- Cost: Lexington Law charges fees for their services. Be sure to understand the fee structure and budget accordingly.
- Guarantees: No credit repair company can guarantee specific results. Be wary of any company that makes unrealistic promises.
- DIY Options: You have the right to dispute inaccurate information on your credit report yourself for free. Consider exploring DIY options before hiring a credit repair company.
Ultimately, deciding whether to hire Lexington Law depends on your individual circumstances, financial situation, and comfort level with the credit repair process. If you are feeling overwhelmed or unsure where to start, Lexington Law can provide valuable assistance. However, if you are willing to invest the time and effort, you can also improve your credit on your own.
Conclusion
Negative items on your credit report can significantly impact your financial health. Understanding these items and taking steps to address them is crucial for building a strong credit history. Lexington Law can be a helpful resource for disputing inaccurate, unfair, or unsubstantiated negative items and improving your credit score. However, it's important to weigh the costs and benefits before hiring them and to remember that you have the right to repair your credit yourself.
