Does a Short Sale Show as a Negative on a Credit Report? #CreditScope

CreditScope

Do you have questions about credit?

Join our live video chat every Tuesday and Thursday at 2:30 p.m. ET on Periscope. Rod Griffin, Director of Public Education at Experian, is available to answer your questions live.

Here are some of the key questions Rod addressed in today’s scope:

If accounts fall off, does that mean it’s really off my report?
Yes, seven years from the original delinquency date the late payments will fall off.  After seven years the delinquency, accounts that are charged off as a loss and any subsequent collection accounts are removed from your credit report.  The time is measured from the original delinquency date and may be shown on your report as the “status date.”  The federal Fair Credit Reporting Act requires the date to be reported by the original lender and collection agencies and it cannot be changed.

Does a short sale show as a negative on a credit report?
A short sale is actually a settled mortgage debt.  The term short sale refers to negotiating repayment of your mortgage for less than originally agreed. You will not see the term “short sale” in your credit report.  Instead, you will see your mortgage account with a payment status of “settled” or “settled for less than originally agreed”.

Anytime an account is reported as settled, it is considered negative.  “Settled” means you didn’t pay off the full amount in the original contract, which will hurt credit scores. Failing to repay in a mortgage in full will have a significant impact

Is it illegal for a debt collections agency to re-age a debt?
Yes, a collection agency cannot change the original delinquency date to re-set the time frame for having it deleted from your credit report.  The Fair Credit Report Act specifies that collection agencies must report the original delinquency date from the original account and they cannot change it. You can make payments to the collection agency, contact with questions and work with them to repay the debt without resetting the deletion time of the account.

How important is it to have diverse credit? What type of accounts should I have?
It is helpful to have different types of credit, like credit cards, installment loans, auto loans and mortgage loans.  Typically, diversity of credit is built over time. Going out and opening several different types of credit at one time might backfire and actually hurt your credit scores for a time. It is more important to wisely use the credit you already have.

The mix of credit is less important than making all of your payments on time and maintaining low balances on your credit card accounts. Over time you will likely have a car loan, other installment loans and perhaps a mortgage, which will gradually add to the diversity of account types in your credit history.

How can my daughter raise her score from 581?
Your daughter should get the risk factors that go along with her score.  The risk factors will tell her what exactly from her credit report she needs to work on to make the score better.  Knowing the number is just the first step. But by itself, there isn’t enough information to know how to improve it. That is why risk factors are empowering. They provide the details you need to make the number better.  By addressing the issues pointed out by the risk factors, she can improve her credit scores over time.

Check out the scope to hear answers to all the questions asked today, and scroll down to see Rod’s responses to a few unanswered questions:

When do inquiries fall off?
Inquiries are maintained on your credit report for two years from the date of the inquiry. Inquiries have minimal impact on credit scores, and the impact decreases rapidly over time. Inquiries alone will never be the reason a credit application is declined or you don’t get the best rates. Late payments, charged off accounts, collection accounts, high balances as compared to your credit limits or other more significant issues will far outweigh the impact of inquiries.

Can someone get your credit score via a soft inquiry?
Yes, in some instances a business may get your credit report and scores with only a soft inquiry being added to your credit history. Examples include prescreened credit offers and insurance applications.

Soft inquiries also include requests for your own credit report, reviews by existing lenders, and request for your credit report for employment purposes.  It is important to note that employers never get credit scores. These soft inquiries can only be viewed by you and only appear in your personal credit report. They cannot be viewed by others and cannot affect your credit scores.

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Scoped on: 02/11/2016

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