A bad credit record means different things for different people, but the commonality is that they all have negative items that give them low credit scores. FICO, the biggest credit score company, explains that this includes delinquent or missed payments, accounts that are turned over to collection agencies, court actions such as judgments or liens, bankruptcy, vehicle repossession and foreclosure. The more of these items a person has, the worse the credit score is impacted.
Most negative items stay on a person's credit reports for seven years from the last activity date, according to Moogalian. This includes account histories, repossessions and foreclosures. Bankruptcy sticks around for 10 years, while unpaid tax liens stay on the record until they are satisfied. Then they drop off in seven years. Positive items stay on indefinitely.
Items only affect credit records while they appear on a
person's credit reports. People with very bad financial backgrounds who turn themselves around will have a clean slate in seven years unless they filed bankruptcy. FICO recommends starting to repair bad credit immediately by getting all payments current and maintaining modest account balances and credit limits. Every positive action helps erase some of the negative items' impact.
People with very bad credit sometimes are unable to get new accounts to build new records when their old ones were closed by the lenders. Liz Pulliam Weston explains that they may need to start rebuilding their records with secured credit cards. These cards require a monetary deposit, which guarantees repayment. The bank extends a credit limit equal to the deposit, and the account history shows up on the card holder's credit reports. Other lenders will eventually extend credit if the person maintains a positive history for at least a year.