'Seven deadlies' to blemish your credit

Recently, I was talking to John Ulzheimer, a longtime trusted source on all things credit and the newly named president of consumer education for SmartCredit.com. He mentioned what he calls the FICO "Seven Deadlies" — major mistakes that blemish your credit report and cut down your FICO credit score. Here's an easy guide.

Public records. Bankruptcies, judgments, liens — all of these rank up there as some of the most damaging. Let's start with bankruptcy. There are two types of consumer filings — Chapter 7 and Chapter 13 — and both can stay on your record for up to 10 years. You need to check your credit reports a few months after a discharge, Ulzheimer says, to make sure all debts that were included in the filing are listed as such.

A judgment occurs when you're sued and you lose in court. Typically, smaller debts such as credit card bills and medical bills are picked up by the credit bureaus, Ulzheimer says. Pay up as soon as possible. It won't help your score, but an outstanding judgment can become a wage garnishment.

Finally, a tax lien is filed by the federal government when you (you guessed it) owe taxes. Liens are different in that they can stay on your report indefinitely, until you pay in full.

Of these three, bankruptcies are the most damaging — in fact, they're likely to be the most harmful of this entire list. Why? "Unlike something like foreclosure, which is focused on a specific account, bankruptcy spills over into all accounts," says Ethan Dornhelm, a principal scientist in the scores development unit at FICO. That said, your life is not over: Keep your record clean after the discharge and you should start getting credit card offers in about two years.

Severe late payment. This is the most common offense. Anything past 90 days constitutes "severe," but all late payments stay on your report for seven years, if reported. Luckily, there's some chance for redemption here, Dornhelm says. "The more recent, the greater impact, but as that ages — if you've missed a payment but you get back on the horse — your score will steadily increase."

Charge-off. This can happen if you're 30 days late, although credit card lenders often give you a few months. The debt is generally then sold to a collection agency. A charge-off will stay on your file for seven years from the date the account is terminally — 180 days — past due. Best action here? Keep in touch with your creditors if you're having problems to let them know you're attempting to stay on top of this debt. Often, they'll work with you.

Collections. This is probably the second most common offense, after a severe late payment. It can be triggered by unpaid medical bills, utilities, credit card debt, you name it, and they're all equal in terms of the impact on your score. The notation will stay on for seven years, regardless of whether you pay it off, but you should still pay.

Settlement. You've seen the ads by companies to help you settle your debt for less than you owe. You can also try to do this yourself — and that's the avenue I recommend — by calling and making an offer. Short sales, too, fall into this category. Settlement will stay on your file for seven years.

Repossession. Any asset that secures a loan can be repossessed. This, too, will stay on your file for seven years.

Foreclosure. Foreclosure stays on your report for seven years. If you want to lessen the blow (slightly), try a deed in lieu of foreclosure — with that, you're waving the white flag, telling the lender you can't pay, and turning in the keys. "Other lenders will see that you didn't force your lender to go through judicial foreclosure," Ulzheimer says.