Credit scores are very important especially if you are planning to buy a home by taking out a mortgage. If you have a high credit score, you will be entitled to higher credit line as well as lower interest rates. On the other hand, a low credit score will provide you with the opposite, limited credit line and high interest rates. This is primarily the reason why you should avoid negative entries in your credit report. Entries like collection accounts, charge-offs and judgments could cost you those very important points.

Judgments are entries that show you are being sued by your creditor for failure to settle a debt. You should avoid them at all costs. A judgment against you will stay on your report for seven years even if you have paid up the debt. It will only show up as “paid judgment” or “satisfied judgment”. In order to avoid these entries, you should do the following.

Check Credit Report Regularly
Your credit report should be used to check for any debts that have yet to be collected. It is recommended that you get a copy of your credit report once every month so you can keep track of negative entries. If there are any wrong entries, you should report them immediately and dispute the claims. You should make sure that all your financial documents are in order especially receipts in order to back up your claims of wrong entries. On the other hand, judgment entries that suddenly appear on your credit report should be reported also. The judgment process requires notification. If you were not served any summons, then you can file for a “motion to vacate”.

Negotiate With Judgment Creditor
You should remember that preventing a judgment entry is easier than removing one on your credit report. This is why you should negotiate with the judgment creditor before the court date. In fact, as soon as you got served, you must contact the creditor at once to work out a payment arrangement. In any case, show up at the date of the hearing to show the judge that you are sincere in your efforts to pay off your debts.

Check for SOL
The statute of limitation for debts is usually within 4 to 6 years. This means that if your debt expired and you were still served, you can use this to dismiss the case against you. On the other hand, the statute of limitation for judgments is from 12 to 20 years. If you do not want your creditor to demand payment for as long as this or worse, they could claim liens on your assets, you should at all cost settle the matter at once.

Not surprising, judgment creditors are usually very open to negotiation. If the entry has been made, then be sure to demand its removal from your credit report in exchange for the debt payment. You should put everything in writing so that you will have proof of the agreement in case the entry still shows up after a few months.

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Many of you might be familiar with the term credit inquiry especially if you have availed of promotional offers or were interested in one. Individuals or businesses offering such services or products would usually try to establish your paying capabilities by making an inquiry about your credit. It does not matter whether or not your application or availment was successful; the inquiries will be reported to the credit bureau and will surely show up on your next credit report.

According to the Fair Credit reporting Act, credit inquiries should be authorized before a company should request a copy of your credit report. When you sign an application form, these businesses consider it as permissions for them to ask about your credit history. Although these credit inquiries may not seem harmful to your credit report compared to delinquencies, charge-offs and collection accounts, you should try to avoid them as much as possible.

When you look at your latest credit report, you can not help but notice some entries that are noted as credit inquiries. You should then check what business made the inquiries. If they were made by businesses offering promotional products or services, then you should not worry. These credit inquiries will not cause you to lose points. On the other hand, any credit inquiry that was made because you were applying for an auto loan, credit cards or housing loan will surely cost you a couple of credit points.

You should not worry if you are the one who made the credit check. It is even recommended that you do this on a regular basis to make sure that your credit report is error-free, updated and accurate. In cases where the credit inquiry is unauthorized, you should dispute it immediately so that it will be removed from your report at once.

You might be wondering how credit inquiries affect your credit scores. Basically, your credit score is calculated based on several factors: payment history, amount owed, length of credit history, new credit and types of credit in use. Depending on your credit history, percentages assigned for each factor may vary. Your credit inquiries are included in the “new credit” group and usually accounts for at least 10 percent of your credit score.

These credit inquiries are further divided into sub-categories that factor in the dates and number of times. In the United States, it is common for a person to be considered high credit risk if the credit history is rather short. It is also a belief that people who have more than six credit inquiries on their reports are more likely to declare bankruptcy eight times more.

In order to recover from the negative effects of credit inquiries, you will need to re-establish your financial credibility by paying your bills on time and in full and keeping low balances on your credit cards. You should also make sure that you authorize credit inquiries when needed. If you handle your finances well, you will not have any problems maintaining a high credit score.

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In the United States, people consider their financial life very important. This can be reflected in their credit record or report. Whenever there are late payments, collection accounts, delinquencies and even bankruptcies, all these go to their credit reports, lowering their credit scores. A low credit score means limited borrowing power. Difficulties in getting approved for loans can be experienced if your credit score did not meet the lender’s standards.
 
Sometimes, the reason for negative the negative entries in your credit report can be attributed to mismanagement of your finances and can easily be remedied by discipline and adjustment of spending habits.  On the other hand, there are people who file for bankruptcies because after trying to explore all available options, they still did not manage to pay off their debts. To seek protection form their creditors, these people would file for bankruptcies in bankruptcy court.

Depending on their circumstances, they could either file under Chapter 7 or Chapter 13. A Chapter 7 Bankruptcy will rid a person of all his debts but lose all his assets in the process. Of course, the burden of proof lies with the person filing for such bankruptcy. On the other hand, a Chapter 13 Bankruptcy allows a person to re-pay all his debts according to an arrangement that is decided by the bankruptcy court. Usually, the bankruptcy court considers the person’s payment capability before deciding on a repayment plan. Creditors are usually left with no choice but to agree to this re-payment scheme.

In most cases, the reason that put people in this situation involved the following circumstances.

Unemployment
The loss of a permanent job can wreak havoc to a person’s finances. This is the reason why many financial experts recommend saving at least three months worth of salary in order to prepare for situations like this. People who lost their jobs will find themselves maxing out their credit cards, taking out personal loans or borrowing from their friends to make ends meet. When their financial situation does not improve, they are left with a mountain of debts that they could never afford to pay now.

Medical Emergency/Death in the Family
Whenever there is a medical emergency or death in the family, some people would tap into their budget because they did not manage to set aside money for crisis like these. Again, it would be wise to set aside a portion of your income every month so that you will have an emergency source of fund. 

Foreclosures
The rising foreclosures rate in the country shows that more and more people are having trouble paying their mortgages. It could be due to rising cost of living and high interest rates. On the other hand, there are those who were badly-advised and took out loans they could never afford. After some time, this would take a toll on their finances. Eventually, they lose their home to foreclosure and are left with a huge amount of debt that they have no way of paying.

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