It's easy to make a mistake or experience hardship when it comes to paying your bills. Some mistakes are so detrimental; you want to avoid them at all cost. Since future creditors and lenders use your credit report to make decisions about you, it's important to understand how each of the following, impact your credit file. 1. Charge-offs Missing your payments for 6 months or more could cause your creditors to deem your account as uncollectible. When this happens, the creditors write that debt off as a loss against their income taxes. Charged-off accounts are allowed to be reported on your credit report for seven years. Just because a debt is charged off (or written off) does not mean the debt is forgiven, the money is still owed. The creditor will usually sell or assign the debt to a collection agency or a lawyer for collection. Some companies will continue to charge interest, but most don't. If they do decide to keep charging interest, they have to continue to report it as income, most companies would rather just write it off and be done with it. Having charge offs on your credit report usually results in the consumer being denied credit by other lenders. Even worse, it can also affect the interest rate that other lenders charge on current debts even if those lenders were not impacted by the charge off themselves. If you find yourself late on your payments, you should always try to contact the lender and let them know you are having problems meeting your financial obligations. Ignoring the situation and letting it get to charge off status always makes it worse. You can usually avoid your account being charged off by at least letting them know you intend to pay and by making small payments as often as you can. It’s much easier to get a paid charge off removed from your credit report than it is an unpaid charge off. When you dispute the charge off with the credit bureaus, they have 30 days to verify to account with the creditor. If the account is paid, many times the creditor will just ignore the verification request. 2. Collections Not only will creditors charge off your account after a period of non-payments, they may also hire a third-party debt collector to collect payment from you. Your credit report may or may not be updated to reflect a collection status. 3. Bankruptcy Filing bankruptcy allows you to legally remove liability for some or all of your debts, depending on the type of bankruptcy you file. Your credit report will reflect each of the accounts you included in your bankruptcy. Even though the bankruptcy information can legally remain on your credit report for seven to 10 years, you can begin rebuilding your credit soon after your debt have been discharged. 4. Foreclosure If you default on your mortgage loan, your lender will repossess your home and auction it off to recover the amount of the mortgage. This process is known as foreclosure. When your home is foreclosed it can severely damage your credit, limiting your ability to obtain new credit in the future. A foreclosure can remain on your credit report for seven years. 5. Tax liens When you don't pay property taxes on your home or another piece of property, the government can seize the property and auction it off for the unpaid taxes. Unpaid tax liens can remain on your credit report for 15 years, while paid tax liens remain for 10. 6. Lawsuits or judgments Some creditors may take you to court and sue you for a debt, in the event other collection efforts fail. If a judgment is entered against you, it can remain on your credit report for 7 years from the date of filing, even after you satisfy the judgment.