How Long Does Derogatory Information Stay on Your Credit Report?
Your FICO credit score ranges from 300 to 850 and is directly based upon information contained within your credit report. Your credit report can contain both positive and negative account data. Derogatory information can lower your credit score, which lenders consult when determining whether to grant you a loan. Federal law dictates how long such derogatory data can legally remain on your credit report.
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Applicable Law
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Prior to the passage of the Fair Credit Reporting Act in 1970, consumers did not have rights when it came to credit reports. According to the Electronic Privacy Information Center, bureaus often sent reports to lenders that contained errors. Since the FCRA was enacted, bureaus are prohibited from including erroneous data on a credit report. The law also limits the amount of time a credit bureau can keep derogatory data on the report.
Significance
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The length of time a derogatory item remains on a report depends upon the type of debt it involves. In general, the FCRA limits the appearance of negative account data on a credit report to seven years. There are two exception categories. Unpaid tax liens can remain on a report for up to 10 years in California and indefinitely in the other states. Chapter 7 and Chapter 11 bankruptcy remain for up to 10 years, and non-discharged or dismissed Chapter 12 and Chapter 13 bankruptcy remain for up to 10 years.
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Prevention/Solution
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The FCRA gives you certain rights when it comes to your credit report. If derogatory information on your report is beyond the FCRA statue of limitations, you have the right to dispute that information. You can file a dispute with the credit bureau online at the bureau's website or by mail or phone. Find the bureau's toll-free number and mailing address on your credit report or at the bureau's website. The bureau has up to 30 days from the date of the dispute to complete the investigation and remove the item.
Considerations
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If you pay a derogatory account that's listed on your report, that payment will not remove the negative item, according to Bankrate.com. The bureau will update the status of the account as paid or settled, depending on if you paid the balance in full or settled the account with the creditor. If you negotiate a settlement with the creditor or collection agency, you can negotiate to have the account deleted from your report. The creditor or agency is not required to delete an account, however.
Warning
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If a company offers to remove an item from your report for a fee, be careful. Credit repair companies make credit repair claims but this could be a scam, according to the Federal Trade Commission. Credit bureaus are required to remove errors from your report but they are not required to delete accurate derogatory information that is still within the applicable statue of limitations under the FCRA. As a consumer, the FCRA gives you the right to dispute mistakes on your report yourself for free.
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