How Long Can a Credit Reporting Agency Hold Information?

Bad credit reports haunt people who have had past financial problems. Lenders see evidence of past mistakes whenever they view the reports in response to a new credit application, and it influences their decisions. The Federal Trade Commission (FTC) explains that credit reporting agencies don't hold most information, including negative items, forever, so even a terrible report eventually improves on its own if the consumer keeps any new accounts in good standing.

Definition

Credit reporting agencies are firms that collect and sell financial data about consumers. There are three national reporting agencies: TransUnion, Experian and Equifax. All three are subject to a federal law called the Fair Credit Reporting Act (FCRA), which governs things such as how they report data and how consumers can view and dispute it.

Features

Credit reporting agencies provide several types of financial data in their records. Lenders, insurance companies and others who view credit reports can see current and past accounts, including creditor names, account types, balances, credit limits and repayment histories. This information helps credit and insurance applications if it's positive, but missed payments, defaulted accounts and other negatives may make it harder to open accounts or obtain new insurance policies. Credit reports also show certain public court records, such as liens and bankruptcies.

Time Frame

Positive information appears on credit reports indefinitely while accounts are open, according to Maxine Sweet of Experian's public education department. Positive closed accounts stay in the records for 10 years. The FTC states that most negative items, such as late payments, unpaid accounts, car repossessions and property foreclosures, disappear from reports in seven years, while bankruptcies are erased in 10 years. The seven-year time frame starts when an account first becomes late.

Considerations

The FCRA allows consumers to check their credit reports in case old negative information still shows up after seven years. There's an official website (see Resources) that provides no-cost Experian, Equifax and TransUnion reports once per year. Outdated information can be disputed directly with the relevant credit bureau, which must remove it if there's no legitimate reason to continue reporting it.

Alternatives

Harmful credit report entries may be deletable before the end of the seven-year term. Any mistakes in credit report data can be challenged. Negative items sometimes contain minor inaccuracies such as typographical errors or incorrectly reported dates or account balances. The credit reporting agencies have to ask the original creditors to verify these entries if consumers dispute them. Sometimes they can't get a reply, which forces them to delete the questionable entries even if the accounts are recent.