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How money mistakes really impact credit reports

Louisiana residents may think that their credit scores are only negatively impacted by late payments, exceeding credit limits or other related mistakes. However, even seemingly innocent actions like applying for a new credit card or loan can put a negative mark on a credit report.

A hard inquiry is what credit reporting agencies call a check on credit history by any lender or bank. It happens when someone applies for a credit card or a loan. Even someone with a high credit score and no late payments could see their number drop every time they apply for a new card or loan. Though getting more credit can actually help a credit score, hard inquiries inevitably knock a few points off, and they could stick around on the report for two years.

Late payments definitely hurt credit scores. In many cases, people are late not because they can't afford their payments, but because they simply forget. However, it's important to note that payment history accounts for 35 percent of a person's credit score. And every late payment stays on a credit report for seven years.

When an account goes into collection, some credit reporting agencies give the debtor a break. For example, the new VantageScore 4.0 doesn't include medical collection accounts that are under than six months old, and FICO Score 9 doesn't include collection accounts that have been paid. Nevertheless, potential lenders that check an applicant's credit history might get these, or other, versions of the applicant's credit score. Generally, collection accounts stay on a person's score for no more than seven years and six months.

While bankruptcy is often thought to be the worst thing for a person's credit score, Chapter 13 bankruptcy only stays on someone's report for seven years; the same length of time as many late payments and collection accounts. Bankruptcy is not for everyone, but for many people who are looking for debt relief, it could be a good option.

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