While most creditors do report to the credit bureaus when a bill is charged-off, you may get a free pass if you’ve had a utility bill charged off.
Something most of us don’t realize is that credit bureaus charge a fee to take in data. That’s right – you pay a fee for your credit report with FICO scores when you apply for credit, but they also collect from the companies who supply the information.
That being the case, many utilities don’t want to pay the fee, so they don’t report. You may find the same thing to be true with local businesses where you hold accounts.
If you aren’t sure, get a copy of your free credit report and check to see if the charged-off account is listed.
If it is, then yes, it is hurting your credit scores. But if it happened more than 2 years ago, it still may not prevent you from getting a mortgage or other credit, especially if you have since repaid the debt.
In fact, you may be able to negotiate with the utility company to remove the item from your credit report in exchange for payment in full. If so, get their commitment in writing before sending the payment.
If they refuse, it’s still to your benefit to repay the debt. Lenders look at your credit scores, but they also look at the credit report itself. If your report shows that you’ve paid the debt and have had good payment history since then, it may not hurt your chances of getting new credit.
Remember that negative information stays on your credit report for 7 years, but its impact on your credit lessens with each year that you show good payment history.
While you’re working to restore your credit after a problem, do be sure to pay all your accounts on time and as agreed. Work hard to keep your credit usage below 30% of the credit available to you, and check your credit report often to assure that it doesn’t contain mistakes. If you do find mistakes, take action to correct them immediately.
If you’re working on building credit in order to purchase a home, don’t make any large purchases such as a car or a house full of furniture within the few months prior to your application for a mortgage. And, since lenders are now returning to the “old rules,” don’t decide to change employment unless the new job is a move up in the same line of work. This is not the time to switch from a secretarial work to truck driving or to strike out as a freelancer.
Author: Mike Clover
CreditScoreQuick.com
