Consumers who make late payments or miss payments altogether likely have negative marks on their credit reports. These negative marks in turn drag down an individual's credit score. For those that have blemishes on their credit, however, the time comes when some of these negative items drop off the credit report and stop negatively affecting the credit score. How long it takes depends on the type of negative item on the credit report.
Negative Credit Listings
The following is a list of the most common negative items contained in consumer credit reports that adversely affect your credit score.
- Late payments - According to My FICO, payments made 30 or more days past the due date remain on your credit report for seven years from the date your payment was late.
- Chapters 7, 11 and 13 bankruptcies - Equifax claims that a bankruptcy filed under Chapter 7 or 11, or a non-discharged or dismissed Chapter 13 filing remains on your credit report for ten years from the filing date.
- Paid tax liens -The Fair Credit Reporting Act states that paid tax lien removal is seven years from the date the lien was paid.
- Unpaid tax liens - Credit.com states that unpaid tax liens remain on a credit report indefinitely. The only exception to this is in the state of California, where unpaid tax liens are removed 10 years from the filing date.
- Collection accounts/charge offs - According to Equifax, collection accounts remain on a credit report for seven years from the date the account first became delinquent.
- Defaulted student loans - Student loans are federal debts. Credit.com states defaulted student loans stay on credit reports indefinitely.
Negative Items Explained
The most common negative items that appear on your credit report are:
- Late payments - Anything that is paid 30 days or more past the due date of the bill or invoice.
- Tax liens - If you owe property, federal or state taxes and a lien has been placed against the title of your property, it shows on your credit report.
- Civil judgments - Civil judgments are court actions against you in which a creditor is attempting to collect a debt. Some common types of civil judgments include child support orders, small claims court cases filed against you and wage garnishments.
- Collection accounts - A collection account is a past due account the creditor sends to a special agency to try to attempt to collect the debt on their behalf. Whether you are paying or not paying a collection account, it appears on your credit report. Accounts that have gone to collections but have been paid in full also appear as negative items.
- Bankruptcies - All chapters of bankruptcies are reported to the credit bureaus.
- Charge-Offs - Any account that has been deemed "uncollectible" by the creditor and has been subsequently written off as a bad debt.
Aging Delinquent Debt
- Be aware of "re-aging". If you contact a creditor years after your account first went delinquent, some creditors use the date of your most recent contact as the date you became delinquent and your seven years begins from that most recent date. The Federal Trade Commission is urging consumers to petition the credit bureaus to get this recent date changed back to the original date.
- The older a negative item, the less impact it has on your credit score. That is not to say negative items don't affect your credit six years down the road, because they do. However, creditors are usually more interested in your recent credit behavior.
- Paid off collections are still negative items. A notation says the item has been paid off, but it still remains on your credit report for seven years nonetheless.
Old Debt, Big Impact
When you have bad debt, it can adversely affect your credit scores for years into the future. Some bad debt has an end, so you can start rebuilding your credit and increasing your credit score once the bad debt falls off your credit report. Other bad debt stays with you for life, so be aware of how bad debt can change your credit history and credit score.