Image © Kostya Kisleyko
We all live busy lives and many of us get extremely irritated when we have to spend time dealing with things that really should be on auto-pilot. Fixing erroneous credit report cards falls squarely in that category. So what happens when you’ve reviewed your credit reports and find an item that you believe is outdated? The answer isn’t as simple as it should be.
First things first, the Fair Credit Reporting Act (FCRA) governs how long certain items can remain on consumer credit files. Section 605 of the Act lays out what information must be excluded from consumer credit reports. It’s their way of giving us a list of timeframes when negative information must be removed.
Generally speaking, negative information must be removed after either 7 or 10 years, depending on the type of information. And, the 7 or 10 year reporting limitations don’t start counting down when the negative information is reported. The limitations begin from when accounts were charged off or when certain public record items are filed. So, a creditor can’t wait to report your charged off auto loan 5 years after it went into default and then expect it to remain on file for 7 years from that date. Under that scenario the charged off auto loan could only remain on your credit files for 2 more years.
Some exceptions to the 7-10 year rule exist. If, for example, a credit report is going to be used for a credit transaction that will involve an amount above $150,000, the underwriting of life insurance with a value above $150,000, or for employment screening where the job would pay an annual salary of at least $75,000 then the 7-10 year rules do not apply. That means your 25-year-old bankruptcy or your 15-year-old late payments could still show up on your credit reports without the credit bureau violating the Fair Credit Reporting Act.
You may have noticed that we’re only addressing negative information as it pertains to credit reporting limitations. That’s by design. There’s nothing in the Fair Credit Reporting Act that requires the removal of positive information from your credit reports, ever.
You wouldn’t want the good stuff to be removed for two reasons. First, positive information has a positive impact on your credit scores, which is always nice. Second, old accounts can also improve and stabilize your credit scores because the age of your credit file is worth 15% of the points in your FICO scores. Point being…old stuff is good. Alas, the credit bureaus will eventually remove old inactive accounts after 10 years. So nothing good remains on a credit file forever unless it’s an active credit card account.
If you see something negative on a credit report that you know occurred greater than 7 or 10 years ago, it still may not be incorrect. For example, unpaid tax liens do not have to be removed from your credit file, ever. And, defaulted Federally guaranteed student loans also do not follow the 7-year rule that other defaulted consumer loans have to follow.
If your ageless item doesn’t fall into those two categories then you may have a problem. The negative item might have been harmlessly misreported with an incorrect purge from date. Or, the dating of the item might be more malicious and fall into the category of “re-aging.”
All negative information on a credit report has a data associated with it called a purge from date. That date is used to age the negative item and the credit bureaus know to delete the item when the 7 or 10 year reporting life expires. But, if an account is misreported with an incorrect purge from date then it could fool the credit bureaus into keeping it on file longer than allowed by Federal law.
Regardless, you still have the power and protections of the FCRA on your side. You can challenge the validity of the item still being reported and the credit bureaus have to investigate and verify the item with the original source within 30 days of your dispute, or they have to remove it. Of course, proof of the age of the negative item will go a long way to proving your side of that argument.