How Long Can Negative Items Remain on Your Credit Report?
How many of you have heard (or believe) that negative items can remain on your credit reports for 7 years? Would you be surprised to learn that that’s not exactly correct and that the law allows for the reporting of negative items for longer than 7 years? And, in some cases, the negative item can remain on your credit files for much longer than 7 years.
Here’s the lowdown on how long the bad stuff can hang around…per the Fair Credit Reporting Act and the Higher Education Act.
Bankruptcies – Consumers generally file one of two types of bankruptcies. The first is a Chapter 7, which discharges all statutorily dischargeable debt. Chapter 7’s can stay on your credit files for 10 years from the date filed. The second type of consumer bankruptcy is a Chapter 13, also called a Wage Earner Program. Chapter 13’s can stay on your credit files for 7 years from the date discharged and no longer than 10 years. Since Chapter 13’s take 3-5 years to discharge most of them stay on file for a full 10 years.
Judgments – No longer than 7 years
Tax Liens – 7 years from the date paid. This means unpaid tax liens can remain indefinitely.
3rd Party Collections – 7 years from the original creditor’s default date. There is a lot of confusion about this one. Some people believe if you make a payment the clock resets. That’s not true. 7 years is it, period.
Charge offs and other general delinquencies – No longer than 7 years.
Defaulted Government Guaranteed Student Loans – The amount of time a student loan can be reported is governed by the Higher Education Act, which says generally that defaulted student loans can be reported for 7 years from the date the loan was paid by the guarantor OR 7 years from the date the loan entered default.
Now, it’s important to clarify the 7 year rule (for all items other than student loans). The 7 years doesn’t begin when you miss your first payment. The 7 years begin when the account has become a terminal delinquency. That’s defined as being 180 days AFTER the “commencement of the delinquency immediately preceding the collection or charge off.”
So if you want to split hair about this then terminal delinquencies can stay on file for 7 years plus the 6 month period leading to the terminal delinquency.
And, there’s even an exclusion to ANY statute of limitation for reporting (per the Fair Credit Reporting Act), which means the items above can remain on your credit reports FOREVER if the credit report is going to be used for a credit transaction of $150,000 or greater, to underwrite life insurance with a policy of $150,000 or greater or if it’s used for employment screening for a job paying $75,000 or more. The bureaus have just chosen to not allow them to stay on longer for those scenarios.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.