Photo credit by moofbong
It can take as little as a few missed payments and balances sent to collections to ruin a credit rating. Unfortunately, it can take up to one year to improve your credit rating from defaulted and late payments.
In other instances such as bankruptcy, it can take up to seven years to re-establish the credit rating. In this time, it can be difficult to obtain credit as those that have declared bankruptcy are deemed the most risky borrowers by credit card companies and other lenders.
Using secured credit cards, you can be on your way to a better credit rating in as little as three to six months. Although a deposit is required to activate the credit card account, equal to or less than the credit limit issued to the consumer, it is a great way to re-establish your credit rating, as the company reports the activity to three of the major credit reporting companies on a monthly basis.
A significant portion of the credit rating is calculated using payment history for opened accounts. Unfortunately, history is not something that can be established overnight.
Removing collections and defaulted accounts from the credit report can have a significant affect on the credit score. These accounts can decrease the credit score and therefore should be paid and submitted for removal as soon as quickly as possible to avoid damage to the credit score. In as little as a month after collection accounts have been removed from the credit file, it can have a positive effect on the credit report and the consumer can see an increase in their credit score.
As much as paying a collections account can affect your credit score, it is important to negotiate with the credit card company to remove the entry from the credit file, in return for payment. Be sure to obtain written notification of the removal of the negative collections account, in case there is a dispute with the company with the credit report. The removal process can take up to thirty days to complete, it is important to be patient with creditors to enable a positive outcome for everyone involved.
It is important to remember that negative credit report entries can remain on the credit file for up to seven years. The only way to remove these entries from the credit report is to wait the seven years, or to negotiate with creditors to have the entry from the credit report.