A person's credit report and attendant credit rating matter in a number of ways. Not only will his score be used by lenders as a means of determining what kinds of loans and interest rates he is eligible for, but often other parties, including many employers and landlords, will consult the score when determining whether to hire or lease to the individual. Negative items may last a long time on a person's report, but they will eventually be removed.
Late Payments and Unpaid Debts
When a person misses a payment on a debt or does not pay a debt at all, the negative item will be noted on his credit report. In these cases, the debt will stay on the record for up to seven years, during which time it will count against the person's credit score. However, its impact on the score may diminish over time. After a record is removed from a credit report, it can no longer impact a score.
Bankruptcies
Consumers can declare two different types of personal bankruptcies, Chapter 7 and Chapter 13. While a Chapter 13 bankruptcy, in which a person's debts and personal finances are reorganized, will stay on a credit report a maximum of seven years, a Chapter 7 bankruptcy, in which some debts may be dismissed and the person may have some of his assets seized, can stay on the credit report a maximum of 10 years. However, once it is removed, it, too, will no longer affect a person's credit score.
Credit Bureau Policies
The exact formula the companies that compile credit scores, called credit reporting bureaus, use to determine a person's credit score is a closely guarded secret. However, a credit reporting bureau may choose to remove a negative item from a person's record before it is legally required to, at which point it will no longer harm the person's score. Under what circumstances the credit reporting bureau will choose to do this are unknown.
Considerations
Sometimes, a debt will remain on a report for longer than it is supposed to. In such a case, the person can alert the credit reporting bureau to have the erroneous record removed. In addition, sometimes a record will last longer than seven years or a deleted record will return if there is a change in its status. For example, if the person pays up an old debt, its expiration date can reset or it can return to the report after being deleted.
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