How Long Does It Take for Derogatories to Go Off Your Credit Report?

The Fair Isaac Corporation, which is responsible for the FICO scoring formula, intends its credit scores to be an accurate risk-assessment tool for lenders. Derogatory accounts on your credit report signify that you pose a lending risk for businesses. Therefore, failing to pay debts lowers your credit score, in order to warn lenders of the potential risk involved in lending to you. However, negative entries do not remain on your credit record forever.

Types

The FICO scoring formula treats certain types of entries on your credit report as derogatory. Public records, such as tax liens, judgments and bankruptcies, are always derogatory. Other negative entries include collection accounts, foreclosures, charge-offs, late payments and repossessions. By removing old derogatory data from consumer credit reports, the credit bureaus ensure that present and future lenders receive the most up-to-date information possible, and that individuals are not penalized indefinitely for previous mistakes.

Time Frame

The Fair Credit Reporting Act allows most negative information to remain on your credit record for seven years. Exceptions apply for certain types of information. For example, a Chapter 7 bankruptcy appears on your credit report for 10 years, and an unpaid tax lien can remain on your credit report for up to 15 years.

Effects

As derogatory entries age, they have less of an effect on your credit scores. The FICO scoring system considers older entries to be less important to lenders than items that are more recent. According to MyFICO.com, new accounts are responsible for 10 percent of each consumer's total credit score. Thus, demonstrating responsible debt management allows you to improve your credit scores while waiting out the legal reporting period for past negative entries.

Errors

A 2004 study by the U.S. Public Interest Research Group concluded that an alarming 25 percent of all credit reports contain major errors that could result in the consumer being turned down for new accounts. Carefully monitoring your credit reports can ensure that harmful and inaccurate information does not appear in your report, and that the credit bureaus are removing legitimate negative entries at the appropriate time.

Disputing Derogatory Information

You have the right to dispute derogatory information that is not correct, that you don't recognize, or that a credit bureau did not remove after the legal reporting period for the negative entry expired. When you dispute information on your credit report, the credit bureau will attempt to verify the report's accuracy. If the creditor reporting the information cannot verify its report, the credit bureau will remove the derogatory entry. Although you can dispute credit information over the phone and online, the Federal Trade Commission recommends filing credit disputes via registered mail. Filing your dispute via mail gives you the opportunity to include documentation that supports your case, and helps the credit bureau to investigate your claims.