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Loading ...There are ways to repair and rebuild your credit and put the past behind you. Here’s how:
Face the Music
Get a copy of your credit report, preferably from all three of the major credit reporting agencies. You’ll need all three to find out what each is reporting and to learn where you need to make corrections or improvements.
Know the Ground Rules
You’ll no doubt find information on your report that you think is inaccurate or incomplete. Here are some common areas of concern:
Collection Accounts: In most cases, lenders must charge off delinquent accounts after 180 days of nonpayment, but some do so sooner. After it is charged off (written off the lender’s books as bad debt), it may be placed for collection. When that happens, you’ll find two marks on your credit report: the listing from the original lender showing that the account has been charged off, and the other remark showing a collection account. But if you don’t pay one collection agency and they pass it on to another agency, you should not see duplicate listings from different collection agencies for the same account. Only the most recent one should be listed, so feel free to dispute duplicates.
Ex-spouse’s Debts: If you’re divorced, you may think you’re off the hook for any debts of your ex-spouse, but don’t be so sure. Any joint accounts you held together will be reported to the credit bureaus in both your names—even if they’ve been assigned to your ex in the divorce decree. The divorce decree does not erase the original agreement with the lender. Any accounts you never held with your ex, however, should not be reported on your credit file.
Paid Accounts: Many people erroneously think that once an account is paid it is removed from your credit report. Not true. Negative accounts can generally be reported for seven years.
Missing Accounts: There’s no law requiring lenders to report information to credit bureaus, so you may find that not all your accounts—gasoline credit cards or personal loans with local lenders, for example—appear on your report. While you can ask the credit bureaus to add those accounts, they don’t usually accommodate those types of requests. They want to have a business agreement with a company before they will accept sensitive consumer credit information.
Medical Bills: Just because you think your insurance company should have paid a medical bill doesn’t mean you are immune from collection activity. The provider of the medical services can collect from you if the insurance company doesn’t pay, and may send it to collections. The collection company isn’t required to get the insurance company to pay either; that’s your job. In the meantime, if you don’t pay the bill yourself, the collection account on your credit report may hurt you for seven years. Some creditors will ignore medical collection accounts if they can correctly be identified as such.
Don’t Let the Past Linger
If negative information that is out of date, and can no longer legally be reported, appears on your report, write to the credit bureau to dispute it. The general rule of thumb is that negative information can remain on your credit report for up to seven years—ten in the case of bankruptcy. (Positive or neutral information can remain forever.) The tricky part is determining exactly when that seven-year period starts.
Late Payments can stay on credit reports for seven years from the last schedule payment. If your report lists that a payment was three months late because a payment that was due January 1, 2005, wasn’t made until May 2005, that late payment can remain on your report until January 1, 2012—seven years from the date the payment was supposed to have been made.
Unpaid Lawsuits and Judgments by law can be reported for seven years from the date they were entered (by the court) or the governing statute of limitations—whichever is longer. The governing statute of limitations is the time under state or federal law that the courts allow for collecting the judgment. In many states, that period of time can be as long as twenty years or more. Once the judgment is paid or the suit is settled, however, the seven-year limitation for paid lawsuits or judgments takes effect. If you want to find out the governing statute of limitations, check with your attorney or your state attorney general’s office.
In practice, all the major credit agencies remove all judgments after seven years—whether they are paid or not. The problem is the plaintiff who is owed the money may be able to get a new judgment filed with the court if you haven’t paid within seven years, and that new judgment could go on your credit record.
Paid Lawsuits and Judgments can be reported for seven years from the date they were entered by the court, not the date you paid them.
Unpaid Tax Liens may remain on your credit report until they are paid, although again, all the major credit agencies say they will remove them after seven years.
Paid Tax Liens may remain on your credit report for seven years after they were paid. Again, the credit agencies will remove this type of negative information if it is more than seven years old.
Nontax Liens can be reported for as long as they remain filed against the consumer’s property, or until the applicable statute of limitations expires. (Equifax does not report property tax liens.) Again, credit bureaus will usually remove information after seven years, but there may be ways to get it back on your report.
Collection or Profit-and-Loss Accounts added to your credit report after December 29, 1997, can be reported for seven and a half years from the original date of delinquency—nor from the date they were charged off or placed for collection. For example, suppose you missed a payment that was due in January 2004. You didn’t make any payments for five months and your account was charged off in May 2004. The charge-off listing could then remain on your report until the end of June 2011—seven and a half years after you missed that first January payment that led to the charge-off.
Now let’s say your account was turned over to a collection agency in December 2007. That collection account (and all subsequent collection accounts for that same debt) can be reported until the same date as the charge-off (seven and a half years from that first missed payment): June 2014.
Collection agencies sometimes tell consumers they have ways to report an account forever till they pay. They may have their tactics, but that statement—and falsifying information to carry it out—is not true and is also illegal. The Fair Credit Reporting Act requires collection agencies to provide credit reporting agencies with the original date of delinquency for tracking purposes.
Having said that, those requirements only apply to accounts added to your report after December 29, 1997. For any accounts added before that time, it is a little more complicated. Under the old law, collection accounts were often reported for seven years from the date they were placed for collection. Each time a collection account was passed on to a new agency, a new seven-year period was started. The law was revised to end that problem but many people still have older charge-off and collection accounts on their reports.
The good news is that if you can prove that original date of delinquency, the credit reporting agencies will honor the newer seven-and-a-half-year rule. But the challenge is to find something to prove it! An old credit report showing the original information, an old collection notice, or even copies of your statements from that time period can work. Even if you don’t have that documentation, try disputing it and state that the information is outdated. It might work.