Don’t close accounts if you can avoid it especially if it’s a Visa, Mastercard or Discover. “Credit inquiries don’t matter as much as rumored,†says Weston. “Sometimes lenders check-in to make sure all is well or mortgage companies may be making inquiries. Your score is impacted by about five points but then it fades quickly.†The higher the score, the more you’re impacted by a negative event.
Because many credit card insurance plans are overpriced and offer less than meets the eye, Weston suggests being proactive about contacting credit card companies individually to see what types of options are available should one fall on hard times. “Bankruptcy is the single worse thing you can do to your credit, so call about a solution first.†Debt settlements are also feasible and the closer you get to the charge-off point — 90 days past due – the sweeter the deal. Beware however, that the forgiven portion becomes taxable income and you will receive a tax form from the IRS. Most negative information falls away seven and a half years after the account first becomes delinquent, but bankruptcy remains for up to ten years. Ultimately Weston says, “There’s nothing permanent about credit scores. If you mess up, you can rebuild over time.”
To keep abreast of credit reporting or for more information on rebuilding your credit visit credit.com and www.naca.net. For free credit reports, visit www.annualcreditreport.com or www.freecreditreport.com.