When does bad information fall off your credit report?
By Erica Sandberg
February 10, 2015
I have my credit reports, and there are a few bad items on them. I heard that bad items stay seven years and then they are gone. But is it seven years from when I started with the credit card or when I made a late payment, or when the collectors got it? These are very different dates, so how do I know when my credit report will be good again? –Mark
It's true that most derogatory information will be removed from a credit report after seven years. The clock starts ticking either at the date of last payment or when the credit issuer charged the account off, meaning the debt is no longer considered collectable.
So why isn't it one single date? Well, you may have charged up a debt, but never made a payment at all! In that case, there would be no “date of last payment,” just a charge-off date, which is when the credit issuer removes the delinquent account from its books, usually after six months of nonpayment. Then it typically sells the account to a third-party collection agency for a fraction of its worth. At that stage, the debt is no longer owned by the issuer, but by the purchasing collector.
Collection agencies reserve the right to report to the credit bureaus, and frequently do. A debt in collections is quite damaging to a report and score, especially in the early years. However, the collector can only send information about that account to the bureaus for seven years from when the account was initially charged off. Unless satisfied, these accounts are frequently sold and then resold several times over, thus complicating the credit report. To cut through the muck, just determine the date of last payment or when the issuer charged the account off.
As for late payments, they will eventually disappear from your reports after seven years, too. To illustrate, let's say you have a credit card, but missed an entire payment cycle. Because of that, some issuers would send notice of that fact to the credit reporting agencies, causing a 30-day late notation to appear. For how long? You guessed it — seven years! The older the ding gets, however, the less it matters. This is especially important to a credit score, as models like the dominant FICO rank payment history as the most crucial factor. What happened recently carries greater scoring weight than what occurred long ago, so while the “late” will continue to appear, its impact will steadily wane.
Be aware that some negative notations can appear for longer than seven years. For example, Chapter 7 bankruptcies can show up 10 years from the filing date, and back child support payments can show up until satisfied.
Something to keep in mind when reading these reports is that you can make a big difference in the way they look by adding positive data to them. You won't be able to remove accurate and timely negatives, but you can overshadow the problems by doing the following:
- Pay off any debts that went into collections within the past couple of years.
- Develop a perfect payment pattern with other accounts. That means paying on time and in full every month.
- Steadily delete any installment loan debt (such as a mortgage or car loan) and revolving debt (such as credit cards).
Continue to check your credit reports every year for free at AnnualCreditReport.com. Eventually the poor marks will fade from history and all that will remain will be evidence of excellence. Even better: Positive activity will remain listed forever, presuming you keep the accounts active, or for 10 years after the account is closed and repaid.
Got a question for Erica? Send her an email.