Credit Reporting Statute of Limitations for Bad Credit

Potential lenders, employers and insurance agencies use the information listed in a consumer's credit file to determine creditworthiness. The Federal Trade Commission regulates basic reporting guidelines for consumer credit reporting agencies, also known as credit bureaus. Bad credit items may only be reported for a specific length of time, according to the Fair Credit Reporting Act. Exceptions to the time frame can vary by state.

Definition

"Statute of limitations" is a legal term referencing the time frame during which prosecution or legal action may be taken as a result of criminal or civil action. Statutes of limitations vary by state and rarely play a role in the amount of time bad credit entries may remain on your credit report. The Fair Credit Reporting Act --- FCRA --- outlines federal guidelines that credit reporting agencies must follow.

Qualifiers

Certain items on a consumer's credit report qualify as bad credit. Judgments, foreclosures and bankruptcies are the three types of bad credit indicators listed in the public information section of the credit report. Other entries listed in the account section of a consumer's credit report include late payment items, delinquencies and charge-offs.

Time Frame

The Fair Credit Reporting Act dictates the time-frame restrictions for bad credit reporting. Bad credit items such as late payments, delinquencies and charge-offs must be removed after seven years. Judgments and foreclosures must also be removed after seven years unless state-specific limitations dictate otherwise. Bankruptcies must be removed after 10 years.

Exceptions

The Fair Credit Reporting Act allows for an exception to one type of bad credit reporting. Judgments may remain on a consumer's credit report for longer than seven years if the statute of limitations for judgments in the state where the judgment was filed exceeds seven years. For example, Minnesota's statute of limitations for judgments is 10 years; therefore consumers who have judgments issued against them in Minnesota may have the judgment listed on their credit report for up to 10 years.

Conclusion

Statute of limitations is separate from the time-frame for bad credit reporting, except in the case of judgments. A state may have a three-year statute of limitation for credit card defaults --- meaning that the creditor has up to three years to file suit against the consumer for defaulting on the account --- but the bad credit information may be listed on the consumer's credit report for up to seven years.