Opening Credits

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
I had several credit cards nine to 10 years ago. Due to illness and loss of work, I failed making the payments. I sent notices about the situation and sometimes $5 to try to avert a problem, but was never able to catch up. All the cards had a small limit between $300 and $500. I was tracked down by one collector and taken to court after seven years and lost $1,400 about five years ago. Should I apply for a card now? Will this restart a problem, though most if not all of this happened years ago? I want to apply for a card. Is all this still on my record?   -- Arvilla 

Dear Arvilla,
To answer your question about whether those old accounts are impairing your ability get a new credit card, either I can take an educated guess, or you can get your credit reports and know for sure.

As astute as I am, I still suggest the latter. Log onto AnnualCreditReport.com and pull them. This is the website that the three main credit reporting agencies (TransUnion, Equifax and Experian) have set up so people can receive one free report from each company once per year, as required under federal law.

When you have the reports, read them over very carefully. Brace yourself, though. If you've never seen them before, credit reports can be confusing. So here's what to look for in each section, in relation to your needs.

1. Personal identification. This is where your name, address and other such data are located. And while where you live and other identifying data aren't part of the qualification process, it's still a good idea for it all to be accurate. Check it to make sure it is all right.
2. Trade lines. This is where all of your past and current credit and debt information lives. And it's also where you need to focus most of your attention. Negative information such as notices of late payments, charge-offs and accounts in collection agencies will be apparent if they are younger than seven years from the date it happened. Circle the dates and then count forward. Is it accurate and within that timeframe? If so, it can stay until it ages off. Dispute any errors using one of the agency's online resolution systems (they will notify the others). Investigations take around 30 days, and if the subscriber can't substantiate the information, it may no longer be reported.
3. Public records. As one of the creditors sued you and won, the judgment will be listed in this section. As with the debts in the trade line section, it can only be reported for seven years from when it was granted. Since you were sued about five years ago, the judgment should be visible for another couple of years. Still, the impact is lessening because it happened so long ago.
4. Inquiries. For you, this is the section that will take less of your energy but it's still worth a look. You'll see which companies have checked out your credit file. That's called a soft inquiry and doesn't affect a credit score (which is generated from the information on all sections of the report). Had you applied for a credit card or loan, however, it would be considered a hard inquiry and would also show up. These types of inquires do ding your credit score, but not in a dramatic way.

If you'd like to pull your FICO score, that will cost you about $20 at myFICO.com.

I believe that most of what you don't want to show up will have already been expunged. However, that leads to a new problem in getting credit, which is that no recent positive information has been reported. Credit issuers like to see current evidence that you've been borrowing and repaying in a responsible way. So, because you probably still have that ugly judgment showing up and no pretty credit patterns to offset it, a credit issuer may reject you.

My recommendation: Go for a secured card. This type of product is perfect for someone trying to reestablish their credit, and typically requires you to make a security deposit. When you have the account, use it responsibly this time. Charge a little each month, then pay the balance in full and on time. After rebuilding your credit rating, you can go for an unsecured card card if you wish.

See related: How to read, understand your credit report, FICO's 5 factors: The components of a FICO credit score, State statutes of limitation for credit card debt

Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.

Send your question to Erica.