The phrase “statute of limitations” often is brought up when discussing negative items on one’s credit report, but this idea is not at all accurate. It can, however, tell you a lot about the person who gives you such information. Someone who talks about a “statute of limitations” when it comes to credit reporting almost certainly is feeding you misinformation. A true statute of limitations has little to do with removing negative marks from a credit report, and more to do with the rights we have surrounding lawsuits.
The only time a real statute of limitations has relevance to a credit report is when an arrest has a statute of limitations that is longer than seven years. Most negative items – such as an unpaid toaster, for example, will no longer show up on a credit report after that time, but the arrest will. Of course, if you stole that toaster and were arrested for it, then the arrest may be on the report for a very long time.
The moral of the story (besides not stealing a toaster) is to know how long the statute of limitations is on a crime for which you have been arrested. Time limits on credit reports are very important to know because by carefully keeping track of these items, you can keep your credit score as high as possible.
So, by law, when are negative credit items (including inaccurate negatives if do not take action sooner) supposed to disappear from a credit record? This depends on the date a debt originally was reported as late or unpaid. If you are unsure, dates could be listed incorrectly and negative items might not ‘drop off’ your report as soon as they should be. (As a word of warning, as your ‘drop’ date grows close, you might receive an offer to deceive you into acting against your own best interest.)
Federal law sets time limits on credit data and protects your rights, but the law is almost always undergoing some type of change. It would be useful to take a look at the Fair Credit Reporting Act for yourself, which is available from the United States Federal Trade Commission in Washington, D.C. In general, negative items must be deleted after either seven or 10 years (plus up to a few months) after first having been reported as late or delinquent.
Seven Year Limits
Most items can be listed on your credit report for only seven years. Remember the “Seven Year Itch”.
- Charge-offs. Charge-offs are items listed as ‘uncollectible’. The credit report drop-off time is seven years plus 180 days or six months from date of the delinquency, not from the date of the charge-off.
- All civil suits and some criminal arrests, as long as the statute of limitations is not longer than seven years. If it is longer, the mark will remain until the end of the statute of limitations. Most statutes of limitations, however, are considerably less than seven years, so the seven year drop-off applies. Arrests listed must be officially recorded and not sealed, or just alleged. Even so, there are steps you can take to remove an arrest from your record.
Ten Year Limits
It is very important to be aware of ten year item drop-off dates, because such items can be terribly harmful your credit score.
- Bankruptcy information. Information is defined as data entered into the records of a bankruptcy court on the date of a bankruptcy court’s judgment (usually called the date of relief or adjudication).
- Most criminal arrests.
No Time Limits?
Items with no time limits currently are very rare. (It is likely that permanent credit files will become more common.)
- A fraudulent credit or insurance application with a principal amount of $150,000 or more.
- A fraudulent job application for a salary of $75,000 or more.
With billions of entries and potentially millions of errors on a single credit report, you absolutely must check the ticking time of negative items on your credit report. The longer an error stays on one report, the more likely it will spread and infect your report in every credit agency. Luckily, the law is on your side. No one should face a lifetime of poor credit, and should instead enjoy a fresh start every seven to 10 years.