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Expert Q&A: Dings on a Credit Report: Erasable?

 
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June 9, 2011
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QHi Credit Guide,
My name is James and I live in Sacramento. I got my credit reports and there are some bad things on them that I have to have removed. I have two accounts in collections for doctors’ bills. One is for an MRI that I had done in July of 2006 that is $3,200 and the other is a hospital bill for $950 that I got at the same time. I need to have them taken off because they are hurting my reports to the point where I can’t do anything. Not get a job, not get a car. How do I get them taken off? James

ADear James,
We’d all love to have our credit report look fabulous — even when it doesn’t deserve to be. However, this is neither possible nor fair. The fact is, there is some credit damage that you’ll have to live with — at least until the law disallows a creditor from reporting it on your file.

According to the Fair Credit Reporting Act, derogatory but accurate information may be evident on a consumer credit report for a total of seven years. After that time-frame ends, it can no longer show up. You’ll still owe the money, of course, but because those who pull reports to assess creditworthiness and financial responsibility won’t be able to see the problem, it won’t do any harm. Ask Erica

So how much longer do you have to wait, James? Simply count forward from the date the hospital charged the accounts off and sent them to the collection agencies. In your case, it looks like this will be sometime in July of 2013. Under most circumstances, the negative information will drop off without you having to do anything, but mistakes can happen. So if the collector continues to report the defaulted accounts, simply contact the credit bureaus and dispute it on the grounds that it should have aged off.

A positive point to be aware of, James, is that you can no longer be sued for those old bills. Location is significant when answering any “what should I do about this black mark” question. The number of years a creditor has to sue you for an unsecured debt varies by state. California has a four year statute of limitations, so for you that window slammed shut in 2010. This puts you in a protected place to start discussions about repayment, if that’s what you want to do.

But let’s now return to your worries about how the bad debts are affecting your ability to gain employment or secure a vehicle loan …

First, while many hiring managers do pull credit reports, it’s usually after they consider the candidate to be desirable. A common fear is that companies are using credit reports as an excuse to not hire someone, but that’s unfounded. It’s usually more of a cursory check, and since you’ll have to give them permission to pull the reports, you can start to formulate your explanation now. Whatever you do, don’t let a couple of collection accounts prevent you from pursuing a job.

Second, to qualify for a loan with excellent terms, it’s true that your credit rating is important. To most lenders, recency, frequency and severity of problems matters. If the problems happened many years ago, they were not habitual and the balance is not terribly high, the harm they’re inflicting should be fairly minimal. While you still have a few years left before they “disappear,” the accounts are elderly. With cash for a down payment, low overall debt and a good payment pattern on other credit accounts, you’ll probably be OK. If the collection accounts do hold you back, pay them down or wait a few years before they fade from view.


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