Credit Basics
Repair Your Credit
Step #1: Get Your Credit Report
As you review your credit report, look for the following potential problems and note them on the Credit Report Problems worksheet.
• Mistakes in personal information, including name (and variations), Social Security Numbers or addresses. (Don’t be too concerned if there are slight variations in previous addresses, or if your employment information is outdated. Employment information is not considered reliable on credit reports and a past address that’s close shouldn’t cause problems.)
• Mistakes in account listings. Look for late payments that aren’t correct, outdated balances, duplicate listings of the same account, or other mistakes.
• Negative items including bankruptcies, judgments, liens, collection accounts or late payments. We’ll discuss how long these can be reported shortly.
• Inquiries from companies you don’t recognize. When a company reviews your credit report, it creates an inquiry. While they may be legitimate, inquiries into your report from companies you don’t know can sometimes indicate fraud.
If you don’t understand something on your report, ask!
The credit reporting agency is required to provide a toll-free number and people who can explain to you anything you don’t understand on your credit report. Take advantage of this if you need it. If you still don’t get a clear answer when you call, ask for a supervisor or call back later.
Use this worksheet to list any problem items you find on your credit report. These may include mistakes or negative items.
Step #2: Understand how long information can be reported
The first thing most people with bad credit want to know is, “how long can this information haunt me?” Under the federal Fair Credit Reporting Act, credit reporting agencies are not allowed to report any information that is too old, incomplete, or wrong. While positive or neutral information can be reported indefinitely, negative information can only be reported for the following length of time:
Bankruptcy Filings: Ten years from date filed, not discharged. The three major credit bureaus, and many smaller ones, have agreed voluntarily to remove Chapter 13 bankruptcies -- a bankruptcy where debts are paid back over several years -- seven years from the date of filing. If that doesn’t happen automatically, you’ll have to ask.
Civil suits, civil judgments, records of arrest: No longer than seven years from the date of entry, or the current governing statute of limitations, whichever is longer.
Paid tax liens: Seven years from the date satisfied (paid). Unpaid tax liens: Indefinite until the lien is paid (see above).
Collection or charge-off accounts: Seven years unless a US Government insured or guaranteed student loan, or National Direct Student Loan (NDSL). If those types of student loans are in default and you bring them current for an entire year, your previous late payments will be deleted.
Any other adverse information, (including late payments) stays on your report for seven years. Adverse information is any data that may cause an unfavorable action result for the consumer, for example, being turned down for credit, employment or insurance; or being charged a higher rate than applied for in the case of credit or insurance.
When does the 7-year period start?
If you have collection or charged off accounts listed on your credit report, you’ll want to read this section carefully! It may be confusing at first, but because mistakes are often made, you’ll want to make sure you understand it.
For collection or charged-off accounts, the 7-year clock starts ticking 6 months from the date you first fell behind leading up to the collection or charge-off. It does not start when the account was placed for collection or to the date of last activity
For example…
Let’s say your credit card payment was due on June 1, 2005. You lost
your job and couldn’t make your required payments. In November of
2005, the issuer charged off your account (wrote it off as a bad
debt). In January 2007, it was placed with a collection agency.
By law, the collection agency is supposed to tell the credit bureau
when it first reports the collection account that the original date of
delinquency was June 2005 and that should start the 7-year reporting
period.
Warning: Beware of collection agencies that tell you they have ways of reporting the collection account “forever” to the credit bureaus if you don’t pay. That’s simply not true.
Worksheet: How Long Can Information Be Reported?
Use this worksheet to list any problem items you find on your credit report. These may include mistakes or negative items.
