In high school and college, you’ve got your “permanent record” — which really isn’t all that permanent but scares students into staying on the straight and narrow. Once you turn 18, you have your “criminal record,” which usually sticks with you no matter what you do or where you go (unless you “know a guy”). And finally, of course, you have your financial record.
Also known as your credit report, this defines whether or not you are a fiscally responsible human being. It is utilized everywhere — before approval for a new lease, prior to driving that car off the lot, and, in some cases, when interviewing for a new job. Thankfully, your credit report and scores are anything but permanent. If you work at building a strong credit history, regardless of when you begin your efforts, your score will eventually reflect your hard work.
But say your credit report gets off to a rocky start. You missed a few credit card payments in college or defaulted on your first mortgage. Maybe you hit a rough patch or have medical problems, and the bills fall by the wayside for a bit. Just how long does this negative information stay on your credit report? Well, depending on the type of negative account you have, the timeline can vary.
The rule of thumb is generally that the bigger the mistake, the longer it stays on your report. But let’s have a look at a more accurate breakdown.
Errors In Your Credit Report (Removed Immediately)
If you find a negative account that you are certain doesn’t belong to you, you need to contact both the credit reporting agency as well as the creditor that has the negative account against you ASAP. All three credit reporting bureaus (TransUnion, Experian, Equifax) have online dispute options, where you can request that erroneous accounts be investigated and corrected with the push of a button. You can also request this via snail mail, both through the reporting agency and the creditor shown.
Assuming the debt is indeed an error, you should be able to have the negative account removed within 30-180 days.
Inquiries (Two Years)
Anytime your credit is pulled at your request, an inquiry (also called a hard pull) is placed on your report. An inquiry here and there is no big deal. However, if you have a large number of these within a short period of time, it can imply to creditors that you’re in trouble and need money fast.
The more inquiries on your report, the lower your score will drop. The consensus seems to be that 6 or less inquiries in a 12-month period is average and acceptable. One of the shorter drop-offs, inquiries only last on your credit report for two years.
Hard Inquiries vs. Soft Inquiries
Not all inquires hurt your credit score. When you apply for a credit card, the creditor will pull your current report. This results in a hard inquiry, which may potentially lower your score.
Soft inquiries occur, though, when you get your credit score, request an auto insurance quote, or when companies check your credit for purposes of making unsolicited credit offers. These soft pulls do not factor into your score.
Late Payments (Seven Years)
A late payment flag can appear on your credit when an account becomes 30 days past due. When you pull your full report, you will see a range of late payment notations, ranging from 30 Days Past Due all the way up to 150 Days Past Due. This tells potential creditors whether you just forgot to send the check one month, or had extreme financial trouble and abandoned your debt(s) for a period of time. Both affect your score, but the latter has a greater impact.
In rare instances, you have the ability to negotiate with your creditors and have past late payments deleted. Some creditors are lenient and will delete old records if you settle your account ASAP. Others will not be as kind, and force you to endure these negative remarks for seven years.
This time period begins on the first day the delinquency was reported. These types of marks are the most common and, of the negative accounts mentioned here, affect your credit score the least.
Tax Liens Paid (Seven Years)
A tax lien usually occurs when the local, state, or federal government takes ownership of property because you haven’t paid your property or income taxes in a timely fashion. The government is going to fight the good fight to recover the money they are owed, down to the last penny. No matter how quickly you resolve the reported debt, this negative account will stay on your credit report for a full seven years.
Tax Liens Unpaid (Fifteen Years)
In the event that you have a tax lien against you which continues to go unpaid, it can stay on your credit report for a whopping 15 years. The chances of you being able to keep money from the government are slim-to-none to begin with; the added penalties involved with keeping it unpaid hardly seem worth the trouble.
Foreclosures (Seven Years)
One of the most severe negative accounts you can have on your credit score is a foreclosure. These accounts will remain on your report for seven years. Having a foreclosure on your record will greatly impact your credit requests during this timeframe, too. The chances of you being able to own another home in the short-term, without paying for it entirely in cash, is a long shot.
Student Loan Defaults (Seven Years)
Before the George W. Bush administration, student loans were commonly forgiven if they were declared during a bankruptcy hearing. Nowadays, it is rare to find a bankruptcy judge that will forgive a student loan, so it’s important to take them seriously.
Defaulting on a student loan usually occurs after 270 days of non-payment. So before the default is reported, you will certainly receive plenty of late payment marks on your credit, in addition to the default notation. Before it gets to that point, look into consolidating your student loans and establishing a manageable monthly payment.
Lawsuits or Judgments (Seven Years)
You should be noticing a seven year theme by now. Following suit with this trend is, well, lawsuits. If you’re unfortunate enough to lose a court case, you can expect to see the judgment on your credit report for seven years. This time period begins on the day that the judgement is entered into the system, not the date of the original debt/filing. So, if you fight a case for 2 years and lose, the negative report could potentially impact your credit for a total of 9 years (assuming there was a collections account sitting on your report during the whole ordeal).
If you’re able to settle out of court before a verdict is made, it’s possible to avoid the negative account sticking to your credit report. Before you sign anything regarding your settlement, request that the case be vacated. Get it in writing! Often, compromising on the judgement results in it being entered on your report as Satisfied or Paid. While this is certainly better than an unsatisfied debt, your goal is to get it removed completely.
Charge-Offs (Seven Years + 180 Days)
A charge-off occurs when your creditor throws in the towel and decides that your debt is not collectible. This usually occurs after 6 consecutive months of non-payment, but the timeline is at the sole discretion of the creditor.
Generally, once a company charges off the amount, they offer it up for sale to a collection agency. This agency then assumes and attempts to collect on the debt, and will also report this collection to your credit. You could potentially have two black marks against your report for the same offense.
After seven years of the charge-off being reported, it should be removed from your credit report. The seven year period begins to run 180 days after “the month and year of the commencement of the delinquency that immediately preceded” the chargeoff. Essentially, it will take 7.5 years to be removed. If a collection is initiated after the charge-off, it will show a more recent date on your credit report. Both accounts will be removed on the same day, however, 7.5 years after the original charge-off.
Bankruptcy (Ten Years)
Now we’re getting into the big boys. Bankruptcy is the sin of all sins on a credit report, and should be avoided at any possible cost. (If you’re considering bankruptcy, here are a few resources that might help!)
When a creditor runs your report and finds a bankruptcy, you may as well be saying, “I cannot be trusted with any money for the next 10 years.” There are a few different options when personally filing (Chapter 7 or Chapter 13), but all are means to the same end, which prevents you from opening the smallest of credit accounts. Bankruptcy should only be used if you have weighed all of your available options first. It is a death penalty like no other when considering your credit report and score.
Learn More: How to Establish Credit After Bankruptcy
You should check your credit score, and check it often. Gaining credit is an important step in growing your financial portfolio. Just as important is being responsible with credit and knowing how and when different actions will affect your future.