Preparing to Make Big Purchases

 

If you are planning to make a large purchase in the next six months, you should pull maintenance on your credit report and if you are buying something jointly, pull the credit report on your spouse or significant other. You are looking for items (dings) that will affect your credit score. Transunion has some thoughts on what to look for. Let’s see what they have to say.

Wondering when judgments and bankruptcies will no longer appear on your credit reports? Check the dates on records in your credit report. Generally, here's how long judgments and bankruptcies remain on a credit report:
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Bankruptcy
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Generally, Chapter 7, 11 and 13 bankruptcies appear as public record items on your credit report for up to 10 years after filing. Chapter 13 bankruptcy records are sometimes taken off sooner, 7 years after filing, depending on the credit reporting company’s policy. When you receive an Order of Discharge in bankruptcy, your creditors should mark those accounts that were discharged as "Included in Bankruptcy" and they will stay on your report for up to 7 years.
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Charge-off accounts
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Generally, if a delinquent account is charged-off, the charge-off record appears on your credit report for up to 7 years.

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Closed accounts
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Generally, negative or derogatory information about delinquent accounts remain on your credit reports for up to 7 years. Positive closed accounts (without late payments or other delinquencies) may appear for longer than 7 years.
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Collection accounts
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Generally, accounts sent to collections will be listed on your credit report for up to 7 years, beginning 181 days from the most recent delinquent period before the collection activity. A collection account’s status should change to "paid collection" once you've paid off the entire amount. If you settle with the collection agency for less, your credit report may list the account as "settled for less than full balance."
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Judgments
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Generally, most court judgments, including small claims, civil and child support, stay on your credit reports for up to 7 years from the date they were filed.
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Late payments

Generally, if you make a payment late, the delinquency could appear on your credit report for up to 7 years.
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Tax liens

Under federal law, city, county, state and federal tax liens could stay on your report indefinitely. Generally, after the lien is paid, the record of it stays on your credit reports for up to 7 years from the payment date.
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City Fines and Parking Tickets

 

Whether you forgot to return your copy of The Grapes of Wrath to the library or to pay a minor parking ticket a few years back, these small infractions could eventually add up and show up on your credit history. Cities and other municipalities can send even small fines to collections, so make sure that you pay up on time and clear out small amounts so they don't turn into a big deal.
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Unsettled Accounts

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Changing service providers can be a pain, but in your rush to get it over with, don't forget to settle up your accounts. Some providers, be they gas, cable, electric, satellite or any number of other services, keep accounts on file when they aren't closed out properly. Make sure that when you make the switch, your account is caught up and you've requested the account be closed, otherwise the account might become inactive or delinquent.
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Closed or Inactive Credit

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It only makes sense: When you're done with a credit card, you close it out, right? Not necessarily. Closing an unused or inactive credit card could reflect as less available credit on your credit history, which is usually seen as a negative. Instead, keep unused credit cards open and use them for small purchases that you pay off immediately.
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Back Taxes

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They say that the only thing you can count on in life is death and taxes, but you'd better add "bad credit" to the list if you neglect to pay what you owe Uncle Sam. The IRS takes a hard line with back taxes and could even put a lien on your home or garnish your wages to get what they're due. This shows up on your credit score, so make sure you're all caught up or at least using a payment plan to settle.
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Soft and Hard Inquiries

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Most people know that excessive hard inquiries to check credit can negatively impact credit scores, but you might not even realize who runs a hard inquiry. When a creditor or lender checks your credit in connection with an application, you'll usually see a "hard inquiry" on your credit report. 

While a credit check for credit cards, loans or a mortgage is expected, you might not realize that opening a new cable account, getting a new cellphone, renting a car, or requesting a credit limit increase can all result in hard inquiries as well. Make sure that they're only done when absolutely necessary to avoid dragging down your score. Generally, these stay on your report for as long as two years, and may lower your credit score slightly.

When a creditor reviews the credit report of an existing customer, or when you access your own data online, a "soft inquiry" typically shows up on your credit report. Soft inquiries don't lower your credit score or appear to businesses checking your credit.

To get the credit for large purchase, you must try to correct as many “dings” on your credit report as you can. Not only can you get the credit that you need but you can also control what price you will pay for that credit.

Financing $15,000 for 48 months to buy a car at 6% cost $255.98 per month. With a clean credit report you can finance this car for 48 month at 2.87% costing you $240.63 per month. Over 4 years, that is a $736.80 difference. That is just one purchase. You may want to buy a house, appliances, and other goods. The cost of financing adds up.