How Long Do Original Creditors Keep Late Payment Histories Available for Credit Bureaus?
When you use credit, you are responsible for paying the debt in a timely manner. If you make a late payment, the creditor may report the late payments to the credit bureau and they will appear on your credit report. It's a good idea to understand just how long that late payment will remain on your report.
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Significance
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Prior to the passage of the Fair Credit Reporting Act (FCRA) in 1970, consumers did not have rights when it came to credit reports created by credit bureaus. Under the FCRA, federal law dictates credit bureau behavior as it applies to credit reports. Specifically, the FCRA limits the amount of time credit bureaus can keep negative items, including late payments, on a consumer's credit report. Such data can only remain for up to seven years and then the bureaus must purge it from the report.
Effects
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According to myFICO, a FICO credit score is directly based upon the information contained within your credit report. FICO scores range from a low of 300 to a high of 850. The higher the score, the better your credit. Late payments lower your score, by as much as 110 points for a 30-day late, according to Bankrate. The later the payment, the more the potential damage can occur to the score. Limiting the amount of time negative items appear on a report limits that account's ability to damage your credit over the long term.
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Considerations
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In 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACTA) as an addendum to the FCRA. Under FACTA, consumers have the right to receive one free credit report each year from the three major credit bureaus: Experian, Equifax and TransUnion. The impetus for passing the law was to help consumers battle identity theft and protect their credit by staying abreast of the data contained within their reports. You can order your free report at the site jointly established by the three bureaus to comply with FACTA: annualcreditreport.com.
Prevention/Solution
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The FCRA not only limits the time negative accounts can appear on a report, it also provides consumers with a mechanism by which those derogatory items can be challenged. If you have a late payment on your report that is outdated or erroneous, you can file a dispute with the credit bureau to have that item removed or corrected. You can file a credit dispute at the bureau's website, by phone or mail. You can find the mailing address and toll-free number on your credit report. Bureaus have up to 30 days to complete the investigation and make changes.
Warning
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Think twice before paying anyone to repair your credit. Promises by companies to remove late payments and other derogatory items may be a scam, according to the Federal Trade Commission. Credit bureaus are not required to remove accurate negative data from a credit report that is still within the statue of limitations, only errors and inaccuracies. Keep in mind that the FCRA gives you the right to repair credit errors yourself for free. You don't have to pay someone to do it for you.
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