If you’ve ever wondered whether or not removing a negative item, like a late payment or charge off, can decrease your credit score… the short answer is YES.
While your payment history makes up 35% of your score, your debt ratio and mix of credit make up 30% and 10% respectively. Often times, when you dispute a negative remark, the item may be removed due to lack of response by your creditor. Depending on how you worded your dispute, this may result in the removal of the entire trade line and can affect your credit score in a variety of ways you didn’t intend.
For instance, let’s say you only have two credit cards reporting. One shows multiple 30 day late payments, is 7 years old, has a $1500 limit and no balance. The other is 6 months old, has a perfect history, a $1500 limit and a $1500 balance. In addition, you have one personal loan less than a year old.
You write the credit bureaus claiming you never had an account with any late payments. If your creditor fails to respond, then the credit bureaus may delete the entire account from your credit report. While your payment history has improved, your debt ratio is now 100%, your credit history is only 6 months old instead of 7 years, and your mix of credit is one to one. I would guess your score would drop significantly in this scenario.
When disputing negative remarks, you have to consider the entire picture. Each change to your credit report will effect your score in multiple ways. This is why its impossible to tell someone exactly how much their score will improve due to removing negative items or adding new credit.
