So I guess question two is.. if I close my account, will it be as if it never happened? I think I;ve heard that before but unsure. Thanks!
Suggestion:
Generally speaking, closing an account can have an adverse impact on your credit. It is likely that your credit rating has taken a negative hit because of the late payments. However, if you are able to bring the accounts to a current standing it may be best to keep the accounts open and use it to rebuild your credit over time, by making payments on time.
The answer to your second question is no. Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7.5 years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7.5 years to the date of first delinquency. Below I can give you an overview of the different factors that impact your credit score.
Your score is based on several variables, including:
1) Payment history, which counts for approximately 35% of your score, is the most heavily weighted factor used in calculating your credit score. Consistently paying your bills on time has a positive influence on your score, while late or missed payments will hurt you in this area. If you have delinquent payments, the older the delinquency the less the negative impact on your score will be. Collection accounts and bankruptcy filings are also taken into consideration when analyzing your payment history.
2) Total debt and total available credit, which counts for about 30%. This section looks at how much debt you have compared to the total available credit on your accounts. If all of your accounts are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred. If your account balances are relatively low compared to your available credit, this part of the risk analysis should help your overall credit score. The score calculation also looks at these two factors independently. Having too much available credit, whether you have used it or not, could hurt your credit score, as statistical studies have shown that people with excessive amounts of available credit are a higher credit risk. Unfortunately, the bureaus do not define exactly what they consider excessive, so best tip is to use credit conservatively and to keep your debt-to-credit limit ratio low.
3) Length of positive credit history, which counts for about 15%. The longer you maintain accounts in good standing, the better your score will be. This shows that you are able to make a long-term commitment to a creditor and are consistently responsible about making your payments. If you have accounts with long history (5 or more years) and no missed payments, you should keep these open and paid off.
4) Mix of types of credit, which counts for approximately 10%. Having several different types of credit, such a credit cards, consumer loans, and secured debt, will have a positive influence on your credit score. Having too much of one type of credit can have a negative impact.
5) The number of new credit applications you have recently completed, which accounts for about 10% of your score. Applying for too much new credit in a short time period makes indicates that you could be credit risk, as you may be desperately trying to keep your head above water. The models make an exception for people who are shopping around for a loan, so if you are simply applying to see who can give you the best rate on a new loan, you need not worry too much about damaging your credit score.
If you would like to learn more about credit reports, credit scoring, and what it means to you, I encourage you to explore the Credit Help Information & Resources material offered by Bills.com.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
{ 4 comments… read them below or add one }
It doesn't matter. The history will stay on your account for seven years no matter what. Think about it: if getting rid of bad information were as simple as closing the account, everyone would have a great score.
Closing them will NOT make it "as if it never happened" and will in fact only further damage your credit history.
Closing the acounts won't make the late payment history go away. You are stuck with that.
Keep the cards. Once you get them paid completely off, use them for small purchases and pay in full every month. This will help you build good payment history. You need at least 24 months of consistent, on time payment history to improve your score. The late payment history won't show in the monthly detail portion after 2 or 3 years of on time payments.
You can use this credit monitoring service to pre-estimate future scores for different scenarios of such payments – credit-report-score.10001mb.com