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Problems That Can Haunt Your Credit Forever
Your credit reports are going to change over time, that’s as certain as death and taxes. New information is added, old information falls off, accounts get older, and your payment history and balances can vary as often as monthly. The ever-changing nature of credit is one of the reasons it’s so important to check your three credit reports frequently.
Why Is Credit Information Removed?
Old and inactive information generally does not remain on your credit reports forever, but you may not understand why the removal of the information occurs.
Some information is removed from your reports due to the credit bureau’s policies. Other information is removed from your reports due to the legal limitations regarding how long the information can be maintained. Finally, there is some information that could remain on your credit reports forever, meaning there’s no requirement to remove it.
What Information Gets Removed From Your Credit Reports?
The Fair Credit Reporting Act (FCRA) regulates how long most derogatory information is allowed to remain on your credit reports. In general, most negative information is required to be removed after seven to 10 years, although there are some exceptions to that rule.
Must be Removed By or Before Seven Years
- Late Payments
- Released Tax Liens
Must be Removed By or Before 10 Years
- Chapter 7 Bankruptcy (10 years from date filed)
- Chapter 13 Bankruptcy (seven years from discharge, but cannot exceed 10 years from date filed)
Closed accounts with no derogatory information are allowed to remain on your credit reports forever. The FCRA does not require the removal of a positive account from your credit reports — and, frankly, given the value of old, good information, you don’t really want it to be removed. Yet credit bureau policy is to remove closed, positive accounts from your credit reports after 10 years of inactivity.
Credit Information With No Expiration Date
If you have made credit mistakes in the past, you’re no doubt grateful for the fact that these issues are generally not permitted to haunt you for the rest of your life. Yet there are a few exceptions.
Namely, if you default on a debt that is owed to or backed by the government, it is probably allowed to remain on your credit reports indefinitely, or at least until you make good on the obligation.
Federally Guaranteed Student Loans
The FCRA does not impose credit reporting restrictions upon federal student loans. In fact, the FCRA is silent on the subject. Instead, credit reporting standards for student loans are governed by the Higher Education Act.
Defaulted student loans are not required to be removed from your credit reports until seven years from the date they are paid. Unpaid student loans can remain on your credit reports forever, although the credit bureaus can certainly choose to remove them eventually.
Unpaid Tax Liens
Legally speaking, there is no requirement in the FCRA for an unpaid tax lien to be removed from your credit reports. The credit bureaus could report your unsatisfied tax liens indefinitely if they desired to do so and, until recently, that is pretty much what happened.
However, the credit bureaus themselves recently elected to remove the vast majority of tax liens from consumer credit reports as a matter of choice. The decision to remove tax liens from credit reports was due to the bureaus’ efforts to comply with new, improved standards for the credit reporting of public records.
The news isn’t necessarily all good, however. If you have an outstanding tax lien, keep in mind that it can still cause problems, including denial for new loans if your lender purchases a public records report from LexisNexis as part of your application review process. Additionally, there is no guarantee that the credit bureaus will not elect to re-add tax liens and other public record information back onto consumer credit reports in the future.