What Happens When an Old Debt Has Been on a Credit Report for Seven Years?

Most debts truly have the "seven-year itch," but some debts can stay on your credit report much longer. Also, when a debt leaves your credit report it does not necessarily mean that you are debt-free. Some debts become noncollectable years before or years after the credit bureaus must stop reporting them. You may need monitor your creditor history for accounts listed in error.

Identification

Debts, such as charge-off accounts and collection accounts, usually leave your credit report after seven years. This means that the debt does not affect your credit rating anymore and lenders will never know that you left it unpaid. A few debts stay longer than seven years. Chapter 7 bankruptcy stays on your report for 10 years and unpaid tax liens can remain indefinitely.

Liability

Credit reporting has nothing to do with liability for a debt. Common debt, such as credit card debt, is collectable for three to six years in most states, but you may owe a debt long after it falls off your credit report. Some states allow creditors to sue you for a debt and renew the judgment indefinitely until you pay it off.

Considerations

Technically, debts can stay up to seven years plus six months, because the credit reporting time limit does not start until you reach "terminal delinquency." This usually means after the creditor writes the debt down as noncollectable or sends it to a collection agency. Businesses usually have six months to collect a debt before calling it noncollectable, thus the reason why debts often stay for seven years and six months, according to Smart Credit.

Tip

Review your credit reports from all three major credit reporting bureaus -- Equifax, Experian and TransUnion -- at least every year. Some companies try to "re-age" debts by reporting a false charge-off or collection date. Alternatively, the credit bureaus may accidentally list a debt for longer than they should. In any case, dispute an item if you feel it has an incorrect age.

Read More

Is it Legal to Have a Credit Check Run If it Is Not Authorized?

Anyone who checks your credit without prior consent has violated the law and it could result in hundreds of dollars in restitution or more for you. Credit profiles are considered a private matter and the act of pulling a report can hurt a person's score. Consumers will probably have to become proactive to stop unauthorized used of credit checks.

Identification

When a creditor runs a credit check on an applicant without receiving authorization, he has violated the Fair Credit Reporting Act. Congress enacted the FCRA in the 1970s to protect consumers from discrimination based on information in their credit profile. Each violation of the FCRA carries a penalty of $100 up to $1,000 for each violation.

Preapproved Offers

The lone caveat to the FCRA requirement for authorization to run a credit check is for

"preapproved offers." This type of offer comes through the mail without the consumer applying for it. Credit checks for this kind of loan do not affect a credit score and are not seen by lenders, because such offers are considered to be a "soft" pull. As of 2011, preapproved offers are legal.

Action to Take In Case of Unauthorized Check

You can sue someone in civil court if they run a credit check without your consent, but you may need a lawyer and will have to prove the act was intentional. In addition to legal action, you should write the lender and ask him to remove this inquiry with the credit bureaus. If the lender ignores your complaint, write to the credit bureaus themselves -- you only need one bureau to uphold your claim for the others to also remove the inquiry.

Tip

Consumers can opt out of preapproved credit offers by filling out a form at OptOutPrescreen.com. The opt out lasts for five years, but you can also opt out of offers forever. Be careful when giving your driver's license to anyone, because it contains enough information to run a credit check. Car dealers sometimes run a credit check without consent, even for people who do not express an interest in financing a car. It is good practice to ask anyone with your private information if they will run a credit check.

Considerations

Some people only need implicit authorization to run a credit check. An employer, for example, can run a credit check as part of background research on a candidate. Utilities, phone companies and landlords usually require authorization to run a credit check as part of their applications.

Read More

What Does "Potentially Negative Closed" on a Credit Report Mean?

Missing a few payments can haunt you for the better part of the decade and cost you a loan, even if the rest of your credit record is spotless. You can tell you mishandled a loan or line of credit at some point during its lifetime, because it might say something in the vein of "potentially negative, closed."

Identification

An account with the status "potentially negative, closed" means the account is paid off or no longer active and had at least one negative item associated with it in the past, such as a late payment. Closed accounts are almost always a revolving loan, such as a credit card. An installment loan, such as a mortgage, would have the status "paid."

Features

An account that has been closed can no longer be used for transactions. Credit reports do not differentiate whether the borrower or lender initiated the closing, so a negative account always looks bad to future creditors. The main body of the credit report details the account history and what caused the agency to list the account as potentially negative. Some credit reporting agencies use alphanumeric codes to report an account that was previously negative. Equifax, for example, uses "I9" or "R9" for accounts that default and go to a collection agency.

Time Frame

Once you have an incident on your account, the credit agency reports it as potentially negative for seven years, unless it involves a bankruptcy, then it stays as a negative account for 10 years. Accounts that go to a collections agency can stay on a credit report for as long as a state's statute of limitations allows. Any account that has a negative item is considered "potentially negative" by the credit bureaus. The bureaus say "potentially negative" because they do not make judgments about anything on report, but do suggest items that might concern a creditor.

Tip

Review any potentially negative accounts for accuracy. Credit agencies handle billions of pieces of data each day, so mistakes are not uncommon. Once you initiate a dispute, the credit agency must investigate it within 30 days -- 21 days in the state of Maine, according to Experian.

Read More

If I Finance a Car Using a Co-Signer, Will My Credit Score Go Down?

Your credit score, also known as your FICO score, is one method that a creditor may use to determine how much risk is involved in lending money to you. Your score can fluctuate over time because of a number of factors. Using a co-signer to qualify for financing will not affect your score. It will, however, influence the co-signer's score.

Determining Your Credit Score

Credit scores are determined by factors including your payment history, the amount of debt you have and how long your accounts have been open. Each of the three major credit bureaus may have a different score for you, depending on what information is included in your credit reports with them.

Why You May Need a Co-Signer

If your credit is less than perfect or you have a short credit history, you may need a co-signer on your car loan application to get financing. Co-signers generally need to have good credit. They are responsible for repaying the loan if you don't.

Co-Signing and the Effects on Credit

Whenever you open a new credit account, it reduces your credit score because it increases your potential debt burden. If you have a co-signer for your loan, that loan will also appear on his credit report and affect his credit score, because it will be considered part of his overall debt as well. If you make late payments or default on the loan, your co-signer's credit will be damaged.

Read More

Does a Credit Card in a Husband's Name Affect the Wife's Credit?

Marriage often has a huge impact on both spouse's credit ratings, despite the fact that the credit bureaus do not track the marital status of individuals. This happens because couples often join their financial accounts. However, keeping accounts separate can still affect both spouses in some states.

Joint Accounts

A credit card in your husband's name can affect your credit if you co-sign on the account. When you merge accounts, you take on the credit history of that account. This might improve your credit history, or if your husband misses payments in the future, damage it. You might also become an authorized user---an account holder with no liability to repay the debt. Authorized users receive the same payment history on the account as the primary borrower.

Community Property

Some states, such as Arizona, have community property laws. In a community property state, both spouses have liability to pay debts accrued during marriage regardless of which name appears on an account. Thus, a lender can pursue you and your husband in court for a civil judgment, which would negatively impact your credit score.

Considerations

Your husband's accounts can appear on your credit history long after you divorce because of errors with the credit reporting bureaus. Sometimes, the bureaus mix up files, especially when two people share the same address, last name or have similar Social Security numbers. Although you can dispute the accounts with the bureaus, you may need the cooperation of your husband to prove the error to expedite the dispute process.

Tip

Ideally, you and your husband should keep separate accounts through marriage so you can determine whom owes what bills in case of a divorce. If a credit card account erroneously appears on your credit history, you should meet the minimum payment first and then dispute the account. You have a liability to pay a debt as long as your name appears on an account, even if a judge orders your husband to pay. If your husband fails to a pay a debt given to him by the court, you have to go back to the judge to force payment on it.

Read More

Credit Scores Explained

A good credit score is an essential financial resource in today's world. Your credit score can determine if you can finance a car, obtain a mortgage or open a credit card account. Banks check your credit score before opening a checking account. Many employers take credit scores into consideration when making hiring decisions.

Definition

Your credit score is a number that summarizes the contents of your credit report. Lenders rely on credit scores to quickly assess the risk a person presents as a borrower. Although there are several credit scoring systems, the FICO credit score is by far the most common. FICO stands for Fair Isaac & Co., the firm that markets the scoring system. The lowest FICO score is 300 and a score of 850 is perfect.

Components

Paying bills on time is the most important factor affecting your credit score. While a lender may not report an occasional delinquency of a few days, even one payment that is 30 days late can seriously reduce your credit score. Next in importance is your total debt load compared to your income. The composition of your debt obligations also matters. Excessive unsecured debt lowers your score. Constantly applying for new credit or closing old accounts also has a negative effect. An occasional change in your credit accounts is normal. What looks bad is making frequent changes. Finally, time makes a difference. The longer your credit history, the more effective it is as a predictor of your future handling of credit. A long record of responsible use of credit raises your credit score.

Good Scores

The average FICO credit score in the United States is around 720, according to CreditScoring.com. A score above 700 is considered a good score. FICO scores in the high 700s get the best interest rates from lenders. A score of 620 to 690 is regarded as acceptable by most lenders. However, you do present more risk with a credit score in this range and lenders usually charge higher interest to compensate. A score of less than 620 is referred to as subprime, or poor. Many lenders won't extend credit to a person with a subprime FICO score. Those who do loan money to subprime borrowers charge even higher interest rates.

Protect Your Credit Score

Your credit report determines your credit score. If the information on your report is incorrect, it can lower your score. Under the Fair Credit Reporting Act, you can order a free copy of your credit report from each major credit bureau once a year through the Federal Trade Commission's authorized provider, AnnualCreditReports.com. You also have the right to dispute any errors you find by going to the credit bureau's website or writing a letter. Once the credit bureau corrects the information on your credit report, your credit score will quickly reflect the change.

Read More

How to Establish an Excellent Credit Rating

Having an excellent credit rating comes with a range of benefits. People with strong credit ratings have an easier time getting a loan, buying a car or getting a mortgage. Bad credit can haunt consumers for seven years or more, according to the Federal Trade Commission. Therefore, the financial decision you make today can impact your credit rating for years to come. Make smart choices to establish an excellent credit rating.

Instructions

1

Pay your bills on time. Creditors look at whether you pay your bills--and pay them on time. Stay on top of your bills and make sure each payment processes on or before the bill's due date. Create a spreadsheet or calendar that lists each bill's due date. You can even use an online calendar to send yourself email reminders to pay your bills.

2

Manage your credit cards. Keep track of your spending, and don't run your credit card up to your limit. The Federal Trade Commission recommends carefully reviewing your credit card statement every month to make sure that double charges or incorrect charges are not on the bill. Do not charge more on your credit card than you can afford to pay off that month. A growing credit card balance can negatively impact your credit rating.

3

Limit the number of credit cards you have. The Federal Reserve System reports that some creditors look at the number and types of credit card amounts you have. Having too many credit cards can hurt your credit rating. Instead, keep a balance of installment loans and credit cards, which can improve your score, according to the Federal Reserve.

4

Reduce your debt. Creditors consider the amount of outstanding debt you have when determining your credit rating. Although some debt, like school loans, are inevitable and even worthwhile, work to pay down your debt every month. Avoid "bad debt" like credit cards.

5

Keep your identity safe. Identity theft can harm your credit rating because thieves can create fraudulent accounts using your personal information. The Federal Trade Commission suggests using passwords to protect your accounts, leaving identifying information like Social Security cards at home and guarding personal information.

6

Check your credit rating every year. The three major credit reporting agencies, Equifax, Experian and TransUnion, must provide a free copy of your credit rating once a year. Check it to make sure all of the activities reported on it are correct.

Read More