A common concern for people is "how long will a negative mark stay on my credit report?" The answer is a maximum of seven years. A bankruptcy or judgment can remain for 10 years depending upon the statute of limitations in your state.
For many people this feels like a heavy prison sentence. During this time they are afraid to try and move out of a cramped apartment or upgrade from an old junker of a car.
Seven years – why?
Is one bad decision deserving of a seven year punishment? Why do you have to live with the high cost of bad credit? The choice probably came down to paying a bill or providing for your family if you want to call that a choice.
Why is seven years the magical number? Has it been discovered that people will not make mistakes or run into financial hardship after seven years?
No, there is no scientific reasoning behind the seven year mark. It is a completely random time limit.
The Fair Credit Reporting Act was passed by Congress in 1970. This piece of legislation established the reporting time limit. Before the Fair Credit Reporting Act a negative notation stayed on your credit report forever.
Congress established the seven year maximum for the credit bureaus. However this is only the maximum, you can often have a mark removed before the seven years have slowly ticked away.
In other words, it is illegal for a credit bureau to report bad credit for more than seven years. Of course, there are many occasions where people rid themselves of negative items long before seven years.
Creditors and collection agencies are not required to report a listing. This is completely voluntary on behalf of the creditors and collection agencies. Furthermore creditors and collection agencies have often removed negative marks before the seven year limit.
Often creditors and collection agencies just need some encouragement from a good credit repair attorney or a compelling credit dispute letter. In addition, the credit bureaus themselves perform a form of credit repair at the seven year point.
In a Utopian society there would be no time limits on credit reporting. Instead, marks would remain as long as they truly reflected the applicant. Information found on a credit report would only provide accurate marks about the applicants' credit worthiness. Instead of being an excuse for a creditor to give you unreasonable interest rate or down payment.
However, the sad truth is that for now we are stuck living with the seven year limit. However, why should we wait to repair questionable credit until some arbitrary limitation has elapsed? Why should we not delete questionable and misleading information immediately so that we can become credit worthy again?