When Does Bad Credit Really Fall Off Of Your Credit Report?
How long will that collection remain on my report?
How long will that bankruptcy hurt my scores?
How long will I have to wait before my credits scores recover from that derogatory?
How long? How long? How long?
Everyone wants to know how long negative items can REALLY be reported. By the time you are finished with this article, you will have a very good understanding of one of the most misunderstood aspects of the Fair Credit Reporting Act: The 7-Year Reporting Period.
7-Year Reporting Period – Time Allowed To Remain On Your Credit Report
The time period legally allowed depends on the date of original delinquency of the account. The problem is, most people don’t keep records and proving your case becomes very difficult, and when collections are sold over and over again, it becomes even more difficult to prove what that original date of delinquency was.
However, if you believe that the date of last activity that has been reported on a derogatory account is inaccurate, but you do not have proof, all you need to is write a letter to the creditor or collection agency asking them to validate the debt. Section 809 of the Fair Credit Reporting Act clearly states that consumers have the legal right to ask that certain documentation be provided by the collection agency to validate a debt. This includes dates, original creditor information, balance breakdown and proof that they have the right and an active license to collect the debt. If the agency cannot validate the debt, then it must remove the debt from your credit report.
When Does the 7-Year Reporting Period Start?
Here’s the law:
Fair Credit Reporting Act Section 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c]
(c) Running of Reporting Period
(1) In general. The 7-year period referred to in paragraphs (4) and (6) 3 of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third-party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
What this means is that the 7-year clock starts ticking 180 days from the date (month and year) of the first missed payment that led to charge off, collection, foreclosure or repossession. So, when you do the math, it is really 7 ½ years (from the last missed payment) that you can expect the derogatory item to come off of your credit report.
On a one-time billing type account (i.e. a medical bill, utility bill, etc.) the 7-year clock begins running 7 years from the date the account became past due, even if the creditor does not send the account to collection in a timely manner, this rule still applies.
In the case of late pays on accounts that do not result in a collection or charge-off, the 7-year clock begins running on the date that you were late.
Can the 7-Year Reporting Period Be Renewed?
In all of my research and years in this business, I have only seen one section of the U.S. Code that refers to having the 7-Year Reporting Period renewed. Title 20> Chapter 28> Subchapter IV, the code on Education. The following section refers to the amount of time a defaulted student loan can be reported on a credit report:
§ 1080a(f)(3) In the case of a borrower who reenters repayment after defaulting on a loan and subsequently goes into default on such loan, 7 years from the date the loan entered default such subsequent time.
Other than the above exception, the 7-year clock cannot be renewed under any circumstances, even if the statute of limitations is accidentally renewed.
Regardless of how long a creditor waits to charge off, sell or transfer a debt, they must report the true and correct “delinquent or last missed payment” date (month and year) that preceded the creditor’s action. If they do not, per Section 605 of the Fair Credit Reporting Act, they can be held liable, and they know it.
Exceptions To The 7-Year Rule
Chapter 7 Bankruptcies can remain on your record for up to 10 years from the date of discharge.
Federal Tax Liens can remain for 7 years from the date paid; however, if not paid, they will remain for up to 10 years.
State Tax Liens are different from Federal Tax Liens. State tax liens can remain for 7 years from the date paid. However, if they are unpaid, they can remain indefinitely. Additionally, state tax liens may be governed by state law.
Information about a lawsuit or an unpaid judgment against you can be reported for 7 years from the date paid or until the statute of limitations runs out, whichever is longer. Also, in some states, an unpaid judgment can be renewed for up to 20 years.
You have probably heard the expression, “Time heals all wounds.” Even in the impersonal world of credit, this saying holds true. The most important element about the 7-Year Reporting Period when it comes to credit challenges on your credit report is to take the necessary steps to determine the accurate date of delinquency as outlined in this article. When you do your due diligence, you will know how long you will have to face derogatory reports and you will know when you can tell the creditors that they no longer have the right to report a record.