Generally, if you’ve missed a debt payment or have accounts in collections, it can stay on your credit profile for up to 10 years, depending on your situation.
The specific number of years an adverse credit mark lasts on your credit report is partly contingent on the type of debt in question. Over time, it will have less influence on your credit scores, and will eventually fall off your credit reports entirely.
To prepare yourself for what to expect in these scenarios, you’ll need to understand how late payments, defaults and other derogatory marks affect your credit.
How long does debt stay on your credit report?
How long a collection stays on your credit report depends on the type of loan you have. Derogatory items may stay on your credit reports for seven to 10 years or more, according to the Fair Credit Reporting Act.
Here’s how long you can expect derogatory marks to stay on your credit reports:
|Hard inquiries||2 years|
|Money owed to or guaranteed by the government||7 years|
|Late payments||7 years|
|Short sales||7 years|
|Collection accounts||7 years|
|Chapter 13 bankruptcies||7 years|
|Judgments||7 years or until the state statute of limitations expires, whichever is longer|
|Unpaid taxes||Indefinitely, or 7 years from the last date paid|
|Unpaid student loans||Indefinitely, or 7 years from the last date paid|
|Chapter 7 bankruptcies||10 years|
Do I still have to pay a debt that fell off my credit report?
Your debt isn’t simply erased once it falls off your credit reports, but your liability for owing it might vary if the debt is past its statute of limitations.
If you never paid off the debt and the creditor is within the statute of limitations, you’re still liable for it and creditors may try to collect the money. The creditor can call and send letters, sue you or get a court order to garnish your wages.
If you never paid off the debt, but it’s past its statute of limitations, the debt is now considered “time-barred”. How you choose to act on a time-barred debt that’s fallen off of your credit report is your choice. According to the FTC, you can do one of the following:
- Pay nothing
- Pay part of the debt
- Pay the total outstanding debt
Regardless of which option you’re considering, talk to an attorney about your best path forward before contacting a debt collector.
Depending on the state you live in, debt collectors might be allowed to call you to try to collect on a time-barred debt. However, creditors and debt collectors can’t sue you or threaten a lawsuit to collect on a debt that’s outside of the statute of limitations.
If you’re looking to put your debt behind you and move on with a clean slate, a surefire way is to pay what you owe, or at least an agreed-upon part of what you owe. Before making the phone call, make sure you know:
- That the debt is legally yours
- The date of the last payment on the account
- How much you owe the creditor
- What you can realistically afford to pay per month or in a lump sum
If you negotiate a payment for less than the full amount owed, get the payment agreement in writing from the collector before you send in any payment.
How long do collections stay on your credit report?
If a creditor’s information regarding an account’s delinquency is valid, the collections record will exist for seven years starting on the date it is filed.
Here’s how it typically works: When a creditor considers an account neglected, the account may be handed over to an internal collection department. Sometimes, however, the account’s debt is sold to an outside debt collection agency. This often happens when you are about six months behind on payments.
“Around 180 days after the original due date of the payment, the creditor might sell the debt to a collections agency,” says Sean Fox, co-president of Freedom Debt Relief. “This step indicates that the creditor has decided to give up on getting payment on its own. Selling to the collections agency is a way to minimize the creditor’s loss.”
At that point, you will start to hear from a debt collector, who now has the right to collect the payment. Depending on the type of debt you have, a variety of countermeasures exist on behalf of creditors to prevent major financial losses.
Unsecured debts, like credit card debt and personal loans, are generally sent to a collections agency, or can even be handled internally. If you fail to pay a secured debt, like an auto loan or a mortgage, foreclosure and repossession are the most common approaches for creditors to begin regaining losses.
If a creditor’s information about a collection is inaccurate, a dispute can be filed against the claim. This generally updates the collection information but doesn’t remove it. If the collection information is entirely inaccurate or false, filing a dispute may require extensive evidence and even an investigation to remove any disingenuous reporting.
Medical debt collections
For several years now, the major credit reporting agencies have treated medical debt owed directly to providers slightly differently than other types of debt. Some of the credit agencies will even ignore medical collection accounts that are less than six months old. This is because they do not necessarily view medical debt as an indicator of credit risk, according to Fox.
“In addition, this grace period gives consumers time to resolve disputes with medical providers or insurance companies, or develop a payment plan, before a bill is deemed overdue,” says Fox.
Even after the unpaid medical debt is added to your credit report, it may not factor as heavily into your overall credit score as other accounts in collection. However, be sure you fully understand what constitutes medical debt in the eyes of the credit agencies.
“Medical bills only become medical ‘debt’ if the unpaid money is owed to a provider such as a doctor, hospital or a lab,” says Fox. “If you paid for your medical expenses using a credit card, it is not viewed by the credit agencies as medical debt; it just becomes part of credit card debt.”
Collections agency debt
Paying off a debt that has already been sent to a collection agency will help improve your credit score. However, payment at this point will not remove collections action from your credit profile.
Under certain conditions, the collections agency can remove the report from your credit profile. One of those conditions is known as a “pay for delete” letter.
“A ‘pay for delete’ letter is a negotiation tool where the collector or lender agrees to remove the account from credit reports in exchange for payment of the debt — typically more than the amount owed,” says debt relief attorney Lesley Tayne of Tayne Law Group. “This strategy is best suited for smaller lenders, as most major lenders are not open to this type of negotiation and is not something you should reasonably expect.”
A letter of goodwill to a creditor is another option that can sometimes manage to get the negative item removed from a credit profile. This can be successful if the unpaid debt is an isolated occurrence and you have a long-standing history with the lender, says Tayne.
What happens to your credit score when derogatory marks fall off your report?
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit scores may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
If a negative item on your credit report is older than seven years, you can dispute the information with the credit bureau and ask to have it deleted from your credit report.
Can you ask creditors to report paid debts?
Positive information on your credit reports can remain there indefinitely, but it will likely be removed at some point. For example, a mortgage lender may remove a mortgage that was paid as agreed 10 years after the date of last activity.
It’s up to the lender to decide whether it reports your account information to the three credit bureaus. That includes your debt that’s been paid as agreed. You can call the lender and ask it to report the information, but it might say no. However, you can add positive information to your credit reports by using your existing credit responsibly, like paying off credit card balances each month.
What are other ways to improve your credit score?
You canbuild healthy credit over time by starting with these steps:
- Make on-time payments. This is one of the most important factors that impacts your credit scores. If you think you can’t afford a payment, reach out to the lender right away. It may be willing to work out a payment plan and keep your account in good standing.
- Check your credit reports. This will help you understand and track your overall financial health. Also look for errors, such as incorrect credit card balances, trade lines that aren’t yours and accounts that are incorrectly marked as delinquent.
- Dispute and fix errors. About 20 percent of consumers have an error on at least one credit report, according to a Federal Trade Commission study. Getting an error removed may help your credit score improve.
- Consider a debt consolidation loan. A debt consolidation loan unites all your debts into a single balance, often at a lower interest rate that can save you money. A debt consolidation calculator can help you evaluate whether this type of loan is right for you, as debt consolidation can temporarily hurt your credit.
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