Nearly all debts, particularly those in default, will appear on the debtor's credit report. When a debt is paid off on time, it will generally do little damage to a person's credit score. However, an overdue debt, particularly one that the creditor has sent into collections, will pull down a person's score for a long time. In Texas, debts can remain on a credit report for up to seven years.
Negative Information on Credit Reports
According to federal law, most negative information can only appear on a credit report for a maximum of seven years. This includes notices of accounts in collection, as well as all overdue or written-off debts. In Texas, as in other states, negative information must be removed from a credit report seven years from the date in which it was entered, at which point it will cease negatively affecting a debtor's credit score.
Positive Information on Credit Reports
While negative information can remain on a credit report for a maximum of seven years, positive information can remain on a report for up to 10 years. While an outstanding, overdue debt is negative information, a debt that was taken out and paid off on time and is considered positive information. It helps establish a positive credit history for the individual, indicating to the credit reporting agency that the individual is capable of paying off loans.
Statute of Limitations on Debts
While a bad debt may appear on a credit report for seven years, under Texas state law, the debt can only legally be collected for four years. This is because Texas has a statute of limitations on debt collection, much like states have statutes of limitations on crimes. The statute of limitations period begins immediately after the last payment made on the debt. This statute will restart again anytime a new payment is made on the debt.
There are several large exceptions for how long a debt will stay on a credit report. First, if any information on a credit report is incorrect, the credit reporting agency has an obligation to correct it. Secondly, the record of a personal bankruptcy can stay on a credit report for up to 10 years. In addition, student loans, as well as other debts owed to the federal government, can stay on a credit report for longer than 7 years if they remain unpaid.