Question of the Day: How Long Do Negative Items Stay on Your Credit Report?
Credit reports can be a challenging concept to present to high school students since it may not seem relevant to many of them who have thin or non-existent credit files today. I like the idea of the “permanent record” that Mrs. McLaughlin would scare us about in 2nd grade. Whenever we misbehaved (OK, I did get in a little trouble), she would warn us that our poor conduct would be “going on our permanent record.” It took us until about 4th or 5th grade to realize that future employers or colleges probably wouldn’t dig into our elementary school conduct grades and we all breathed a deep sigh of relief.
Credit reports come pretty close to “permanent records” and have extremely long memories so the intent of this question is to prime students to the concept that mistakes they make with their money now (not paying parking tickets, paying bills late or having a late bill sent to collections) can have a long-term impact.
So, back to the original question: How long do negative items stay on your credit report?
- Up to 7 years: “The vast majority of derogatory information can remain on your credit files for as long as seven years. The list is going to include late payments, collections, judgments, settlements, foreclosures, repossessions, released tax liens and charged off accounts. Those items make up the bulk of derogatory information appearing on consumer credit reports.”
- Up to 10 years: Bankruptcies. “That being said, there’s a very small list of derogatory items that can remain on credit files for up to ten years. A Chapter 7 bankruptcy, which is the bankruptcy that eliminates all statutorily dischargeable debts, can remain on a credit report for up to 10 years from the date the bankruptcy was filed. A Chapter 13 bankruptcy, which is the bankruptcy that requires you to make payments to a court assigned trustee who distributes the monies to your creditors, can remain on a credit report for up to 10 years as well.”
- Indefinitely: Federal student loans and unpaid tax liens. Yes, you read that right, these items can stay FOREVER. It truly becomes part of your permanent record!
“There are two items that do not have to be removed from your credit files, ever, although the credit bureaus can certainly choose to remove them eventually. Defaulted and unpaid federally guaranteed student loans aren’t even mentioned in the section of the Fair Credit Reporting Act that defines how long negative items can remain on your credit file. In legal jargon that means the Act is “silent” on the issue, which means they can be maintained indefinitely as long as they remain unpaid. Unpaid tax liens can also remain on a credit file indefinitely.
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.