Credit Bureaus - Learn the Truth about Credit Reporting
Posted by: Matt Douglas in Finance, tags: FinanceA 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.
The majority of people fell like they have just been handed a long prison sentence. During this time they are afraid to move into a home or upgrade to a nicer car because they do not want to be charged outrageous interest rates.
Seven years - why?
Is a one time mistake with your credit really worthy of a seven year punishment? Why should you have to pay the outrageous cost of having a bad credit report, especially when it was just a brief time in your life? Do all the months of paying on time not count for anything?
Is there something magical or statistically relevant about seven years that will make somebody all of a sudden credit worthy again? Did financial experts perform complicated tests and discover that a person needs seven years for credit rehabilitation?
No, there is no scientific reasoning behind the seven year mark. It is a completely random time limit.
Did you know that before the Fair Credit Reporting Act the credit bureaus had no time limit to how long a negative mark could remain on your credit report? In reality a negative mark remained on your credit report forever.
Finally, Congress placed a time limit on the bureaus. Please do not be confused that seven years is how long an item must remain on your credit. Seven years is the reporting maximum.
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.
Reporting to the credit bureaus is completely voluntary. Creditors and collection agencies are not required to report any notations or accounts to the bureaus. As well they often remove notations and accounts long before seven years.
Creditors and collection agencies usually just need a little encouragement from a compelling dispute letter or a good credit repair attorney. Plus, the credit bureaus perform credit repair on your report at the seven year mark.
In a perfect world there would be no arbitrary reporting limit. Instead, marks would remain as long as they bore the true characteristics of the applicant. Credit information would provide accurate indications of our credit worthiness and not just give the banker an excuse to jack up interest rates so they can earn a bigger profit.
Just like there is no good reason for the seven year time limit for a negative notation to be on your credit report. There is no good reason why we should not make efforts today to remove negative information from our credit report.
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