If Creditor Closes an Account Due to Bad Pay History, Is This the Date of First Major Delinquency?

Confusion regarding the date of first major delinquency of an account may cause you to believe that a debt will stay on a credit report longer than it should. If a creditor closes your account due to default, you need to calculate the first date of major delinquency yourself. When a debt stays on your report too long, you should dispute it with the credit bureaus immediately.

Identification

The date of first major delinquency is always the day you miss your first payment. For example, if you miss a payment on January 1 and the creditor sells the account to a debt collector on May 1, the date of first major delinquency is January 1. Using the date you first missed a payment ensures that a creditor cannot report a bad account for longer than the Fair Credit Reporting Act allows.

Misconception

Your credit report does not list the date of first major delinquency. Instead, you see the date of last activity. The date of last activity has almost no bearing on your credit score and is merely for record-keeping purposes. A creditor can sell your account or change the last date of activity years after the date of first major delinquency.

Federal Credit Reporting Time Limit

The Federal Credit Reporting Act allows the credit reporting bureaus to list delinquent debt for seven and a half years. Most creditors write-off a bad debt when it collects no payment for 180 days straight. At the 180-day mark, the creditor can try to collect the debt or sell it to a debt collector. Either way, the actual reporting time limit starts on this day. Some public records, such as tax liens and bankruptcy, can stay for longer than seven and a half years.

Tip

If you believe that the credit bureaus and your creditors list a bad account longer than they should, dispute the item with the credit bureaus. Sometimes, creditors and collection agencies list a wrong debt to damage a borrower's credit rating longer and hope that this forces him to pay up. The credit bureaus must investigate your claim within 30 days of your initiating the case and creditors must verify the date on the account as well as prove its accuracy.