Consumers make financial mistakes from time to time, some of which spill over onto their credit reports.
Negative information on your credit report is not a life sentence, however. In fact, per the Fair Credit Reporting Act, all negative information on your credit report will be removed at specified times.
In a nutshell, the amount of time negative information will remain on your credit report depends on the type of negative information, and on how you addressed it in the first place.
Credit Reporting Time Limits: Common Pain Points
This post will detail the time it takes for consumers to break free from their negative credit history.
A rule of thumb — the older the negative item, the less of an impact it will have on your credit score. A three-year-old debt, for example, will affect your score less than a three-month-old collection.
To break down the specifics, the following is a list of seven types of negative information one might find on their credit report, and how long it takes for consumers to wipe their slate clean in each category:
1. Civil debts*
Civil debts, or debts the consumer owes through the court, will remain on the credit report for seven years from the filing date.
2. Unpaid tax liens*
Unpaid tax liens will remain on the credit report for 10 years from the filing date, while paid tax liens will remain on the report for seven years from the payment date. (A tax lien, for consumers who are unfamiliar with the term, is imposed on a property to ensure the payment of taxes. It may be imposed in response to delinquent taxes, or in response to consumers failing to pay their income taxes.)
Chapter 13 bankruptcy indicates that some of the consumer’s debt is repaid, and will disappear from the credit report after seven years from the filing date.
Chapter 7 bankruptcy, however, indicates that none of the debt is repaid. Therefore, it will remain on the consumer’s credit report for 10 years from the filing date.
4. Closed accounts
Closed accounts, with negative payments, will remain on your credit report for 10 years. (Note that positive accounts will stay on your credit report longer than negative accounts.)
5. Late payments
Late payments will remain on your credit report for seven years from the delinquency.
Correspondingly, if a series of late payments are brought current, they will all disappear from your credit report after seven years from the first missed payment.
6. Collection accounts
Collection accounts will remain on your credit report for seven years from the original delinquency date of the account.
7. Credit Inquiries
Credit Inquiries will remain on your credit report for two years. That said, their impact on credit scores is minimal.
*Note that starting July 1, credit reports will no longer display tax liens and civil debts that do not list the consumer’s name, address, and date of birth or Social Security Number.
This could substantially benefit consumers with incomplete civil debts and tax liens, improving their credit score by up to 100 points.
Are There Alternatives to Waiting for Negative Information to Disappear from My Credit Report?
While there’s no surefire way to eliminate negative information from your credit report without simply waiting it out, you can certainly try. These three strategies are known to work under certain circumstances:
1. Request a goodwill deletion
Write a letter to the creditor, and explain why you were late. This is an effective strategy for consumers who typically make timely payments. Creditors are not obligated to approve goodwill deletion requests, but they will consider doing so for the right candidates.
2. Submit a pay-for-delete offer to your creditor
Contact your creditor, and ask them to consider removing the negative information if you pay the full amount. Again, creditors are under no obligation to comply. But they will from time to time, if you’re willing to shell out what you owe.
3. File a dispute
The Fair Credit Reporting Act states that consumers have the right to an accurate credit report. Consequently, should you identify any errors on your report, you may either file a dispute with the credit bureau or with the business that reported your late payment to the credit bureau.
Keep in mind: disputes are meant to eliminate errors from your credit report, not to mask your negative credit history.
For more information on Credit Disputes and Consumer Protection, subscribe to our newsletter.
Like this post? You might also like The Ultimate Guide to Credit Scores.
Founder of TeachLegal
ABOUT THE AUTHOR
Shawn Smith is the founder of TeachLegal, where he helps readers educate themselves on personal finance, credit repair, debt solutions, and consumer law.
Shawn is an attorney representing clients in the Iowa District and Appellate Courts, Iowa Northern and Southern District Federal Courts, and the Northern and Southern District Bankruptcy Courts for the State of Iowa.