When do Negative Marks
Expire from Your Credit?

Negative information can show up on your credit report in a number of different ways. Some of the more obvious and more serious ways include foreclosure, bankruptcy or a tax lien. Your credit report can also hold negative information due to late payments on an installment loan such as a car payment or credit card accounts. How long this negative information stays on your credit report depends on the type of credit and the action that caused the negative information to appear on your credit report in the first place.

Fair Credit Reporting Act

According to federal law, most negative information must be removed from your credit report after seven years

The Fair Credit Reporting Act is the federal law that established the amount of time negative information can remain on your credit report. As pointed out by Carreon and Associates, federal law always rules unless it offers less protection to the consumer than state law. If your state law offers more protection (e.g., shorter time periods for negative information), the state law rules.

According to federal law, most negative information must be removed from your credit report after seven years. This includes late payments, accounts that are charged off as a loss by your creditor, closed accounts, accounts put up for collection, foreclosures, repossessions of vehicles and other property, court judgments such as child support, civil and small claims, and tax liens that are paid.

Generally, the seven-year period for accounts that are placed for collection or charged off as a loss by the creditor starts 180 days after the last delinquency date of the original account. The seven years for child support, civil and small claims judgments starts on the filing date. Tax liens that are paid remain for seven years starting from the date they are paid.

A past due account may subsequently be sold or transferred to a debt collector, or the consumer might respond to efforts by the debt collector to collect on an old account that was sold or written off by the original creditor. As indicated by Carreon and Associates, these actions do not cause the seven-year period to start up again. The seven years run from 180 days after the delinquency date with the original creditor.

The Federal Trade Commission points out that bankruptcy can remain on your credit report for 10 years. Unpaid judgments against you can remain on your report for seven years or until the statute of limitations expires, whichever is longer. Information about criminal convictions and tax liens that are left unpaid can remain on your credit report indefinitely. Also remaining indefinitely is information reported in relation to your application for a job that pays more than $75,000 a year, or when you apply for more than $150,000 of credit or life insurance.

Finding and Correcting Errors on Your Credit Report

Negative information can also appear on your credit report by mistake. Therefore, it's important to review your credit report periodically and take the necessary actions to have the errors corrected or the negative information removed. Under the Fair and Accurate Credit Transactions Act, you can request one free credit report every 12 months. You can request this report from one of the three major credit reporting agencies: Equifax, Experian or TransUnion. You can also request your free annual credit report at AnnualCreditReport.com.

Modifying Spending Habits and Budgeting

There is nothing a credit repair company can charge you for that you can't do yourself

It takes time for negative information to be deleted from your credit report, but you can take advantage of that time to make some changes in your spending habits and personal finance management to ensure it doesn't happen again. To effectively gain control over your personal finances, you need a budget. And once you have a budget, you need to stick to it. This means being disciplined in your spending and making some sacrifices. You must keep track of all your expenses, including minor cash expenses, which can add up. Then you need to compare your actual spending with your budget and make any necessary adjustments.

Credit Counseling

If you find that you are unable to stick to a budget and your bills are piling up, you might consider a credit counseling organization. Many of these organizations are nonprofits and can help you with your financial difficulties. But you need to be careful. Not all credit counselors are reputable, qualified, or even legitimate, and some charge high fees. Get some information and references before you decide to work with a credit counselor.

As recommended by Consumer Reports, credit counselors should be members of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

Record Keeping

In addition to modifying your spending and sticking to a budget, you can also work on your record keeping. You should carefully review your billing statements to ensure they do not contain any mistakes, and to be sure that your payments have been correctly posted. If you find any errors, you should notify the company and dispute the error immediately.

If you change your address, you should be sure to notify your creditors so you continue to receive your bills and statements on time. This avoids late or overlooked payments that could subsequently show up on your credit report.

If you set up automatic payments with a charge to your bank account, be sure you know when the charges are made each month, so you have a sufficient balance in the account to cover them. You might also consider requesting overdraft protection or a line of credit in case of insufficient funds that could cause a payment to be rejected by the bank.

If you are faced with a situation in which you can't pay a bill, you should contact your creditor immediately and try to get an extension of time to pay, or work out a modified payment plan. This action on your part, in addition to helping you make the payment, can also avoid having new negative information placed on your credit report. And finally, be wary of credit repair companies. As the Federal Trade Commission points out, there is nothing they can charge you for that you can't do yourself.

Kevin Hagen