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9 Negative Items That Stay on Your Credit Reports

Positive information about your finances stays on your credit history for a long time--but the bad news is that negative information stays there too! Laura covers nine negative items that can appear in your credit history and for how long.

By
Laura Adams, MBA,
April 11, 2018
Episode #539

How Long 9 Negative Items Stay on Your Credit Reports

The purpose of your credit file with the major bureaus, such as Equifax, Experian, and TransUnion, is to allow creditors and merchants to get a complete picture of your financial life and evaluate you accurately. A credit bureau doesn’t make judgments or lending decisions—they simply maintain your credit report, which is a history of data reported to them.  

The good news is that positive credit information can stay on your credit history indefinitely, and at least for 10 years. But the bad news is that negative information sticks around for a long time, too, according to your state’s law and the Fair Credit Reporting Act (FCRA).

In this post, I’ll cover nine negative items that can appear in your credit history and for how long.

9 Negative Items That Can Be Listed on Your Credit Reports

  1. Bankruptcy
  2. Civil judgment or lawsuit
  3. Tax Lien
  4. Late payments
  5. Charge Off
  6. Collections
  7. Settlement
  8. Voluntary surrender
  9. Foreclosure

Here’s what you should know about the different types of negative information that can appear on your credit history and when they disappear.

1. Bankruptcy

Filing bankruptcy is one of worst items for your credit. It’s a federal legal process where you declare yourself unable to pay your debts. A bankruptcy is entered into the public records, and then gets picked up by the credit bureaus. The two most common types for individuals are Chapter 7 and Chapter 13.

With a Chapter 7 bankruptcy, you agree, in exchange for your debt being erased, that your property (except types exempt under state law) can be sold to raise cash. This is terrible for creditors because they may receive little or none of the amount you owe. Chapter 7 stays on your credit report for 10 years after the filing date.

With a Chapter 13 bankruptcy, you keep all your property, but agree to pay creditors a set portion of your balances according to a three- to five-year repayment plan. This is less harmful to creditors when compared to a Chapter 7, and it stays on your report for seven years from the filing date.

Filing either type of bankruptcy doesn’t make any past due accounts disappear from your credit reports. The affected accounts get updated to show that they’re included in a bankruptcy, and remain on your credit reports for seven years. 

Free Resource: Credit Score Survival Kit – a multimedia tutorial with smart strategies to build and maintain excellent credit for life!

2. Civil judgment or lawsuit

If you have a delinquent debt, the creditor may file a lawsuit against you to try to collect what you owe. If you don’t respond or you lose the suit in court, a judgment is filed in the public records and it shows up on your credit reports.

If you have a delinquent debt, the creditor may file a lawsuit against you to try to collect what you owe. If you don’t respond or you lose the suit in court, a judgment is filed in the public records and it shows up on your credit reports.

Depending on your state’s laws, having a judgment against you allows creditors to take legal actions, such as garnishing your wages and seizing your bank accounts or other property to repay debt.

Typically, a judgment stays on your credit history for seven years from the filing date, even if you pay off the debt. However, some states, such as New York, have a shorter statute of limitations that may allow paid judgments to fall off your credit reports sooner.

3. Tax Lien

If you don’t pay taxes that you owe, such as property or income tax, the federal and state governments can place a tax lien on assets, such as your real estate, financial accounts, and personal property. Just like with a bankruptcy and judgment, a tax lien appears on your credit reports and has a seriously negative effect on your credit.

An unpaid tax lien can stay in your credit file indefinitely, but the timing depends on your state’s law. If you pay a tax lien, it gets released in the public records and stays on your credit reports for seven years.

4. Late payments

Having late payments on your credit reports is the most common type of damaging data. They’re typically recorded when you become 30 days past due, but it depends on the type of debt.

For example, if your credit card payment was due on January 1, but you didn’t pay it until the middle of February, your credit reports will include a 30-day late payment. Even if you catch up and pay the past due amount, that black mark stays in your file for seven years.

This is a disappointment to many who mistakenly let a payment due date slip through the cracks. What about just closing the account to redeem your credit? Nope, closed accounts with negative information stay on your credit report for seven years from your original delinquency date.

A special situation is getting behind on federal student loan payments. It’s not reported to the credit bureaus until you’re more than 90 days past due. However, if you miss payments for nine months, you’re considered in default and the entire unpaid balance of your loan, plus interest, becomes due immediately.

Not paying a federal loan is very serious for your credit and financial life. In addition to the acceleration of your balance, there are many negative consequences including losing the ability to choose a repayment plan, get a loan deferment, or qualify for additional student aid. Plus, your tax refunds, federal benefits, and a portion of your wages can be withheld to pay off a past due federal loan.

So always contact your federal loan servicer the moment you know that you can’t make a payment. They can help you choose the best option for your financial situation.

5. Charge off

If you’re seriously behind on paying a debt, such as over six months past due, a creditor may update the account status to a charge off. This is an accounting term that means a creditor gave up on trying to collect a debt and reclassified it from a receivable to a loss.

Having a charge off account means that’s it’s officially closed, but that you still owe the balance, and it stays on your credit report for seven years.

Having a charge off account means that’s it’s officially closed, but that you still owe the balance, and it stays on your credit report for seven years. If you pay it, the status changes to “paid charge off,” but remains for seven years from the original delinquency date.

Remember that your credit report is a living history that continues to show open and closed accounts for a set period. Having a charge off is considered negative, but it affects your credit scores less as time passes.

See also: 12 Credit Myths and Truths You Should Know

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