The purpose of your credit file with the major bureaus, such as Equifax, Experian, and TransUnion, is to allow creditors and merchants to get a complete picture of your financial life and evaluate you accurately. A credit bureau doesn’t make judgments or lending decisions—they simply maintain your credit report, which is a history of data reported to them.
The good news is that positive credit information can stay on your credit history indefinitely, and at least for 10 years. But the bad news is that negative information sticks around for a long time, too, according to your state’s law and the Fair Credit Reporting Act (FCRA).
In this post, I’ll cover nine negative items that can appear in your credit history and for how long.
9 Negative Items That Can Be Listed on Your Credit Reports
- Bankruptcy
- Civil judgment or lawsuit
- Tax Lien
- Late payments
- Charge Off
- Collections
- Settlement
- Voluntary surrender
- Foreclosure
Here’s what you should know about the different types of negative information that can appear on your credit history and when they disappear.
1. Bankruptcy
Filing bankruptcy is one of worst items for your credit. It’s a federal legal process where you declare yourself unable to pay your debts. A bankruptcy is entered into the public records, and then gets picked up by the credit bureaus. The two most common types for individuals are Chapter 7 and Chapter 13.
With a Chapter 7 bankruptcy, you agree, in exchange for your debt being erased, that your property (except types exempt under state law) can be sold to raise cash. This is terrible for creditors because they may receive little or none of the amount you owe. Chapter 7 stays on your credit report for 10 years after the filing date.
With a Chapter 13 bankruptcy, you keep all your property, but agree to pay creditors a set portion of your balances according to a three- to five-year repayment plan. This is less harmful to creditors when compared to a Chapter 7, and it stays on your report for seven years from the filing date.
Filing either type of bankruptcy doesn’t make any past due accounts disappear from your credit reports. The affected accounts get updated to show that they’re included in a bankruptcy, and remain on your credit reports for seven years.
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2. Civil judgment or lawsuit
If you have a delinquent debt, the creditor may file a lawsuit against you to try to collect what you owe. If you don’t respond or you lose the suit in court, a judgment is filed in the public records and it shows up on your credit reports.
If you have a delinquent debt, the creditor may file a lawsuit against you to try to collect what you owe. If you don’t respond or you lose the suit in court, a judgment is filed in the public records and it shows up on your credit reports.
Depending on your state’s laws, having a judgment against you allows creditors to take legal actions, such as garnishing your wages and seizing your bank accounts or other property to repay debt.
Typically, a judgment stays on your credit history for seven years from the filing date, even if you pay off the debt. However, some states, such as New York, have a shorter statute of limitations that may allow paid judgments to fall off your credit reports sooner.
3. Tax Lien
If you don’t pay taxes that you owe, such as property or income tax, the federal and state governments can place a tax lien on assets, such as your real estate, financial accounts, and personal property. Just like with a bankruptcy and judgment, a tax lien appears on your credit reports and has a seriously negative effect on your credit.
An unpaid tax lien can stay in your credit file indefinitely, but the timing depends on your state’s law. If you pay a tax lien, it gets released in the public records and stays on your credit reports for seven years.
4. Late payments
Having late payments on your credit reports is the most common type of damaging data. They’re typically recorded when you become 30 days past due, but it depends on the type of debt.
For example, if your credit card payment was due on January 1, but you didn’t pay it until the middle of February, your credit reports will include a 30-day late payment. Even if you catch up and pay the past due amount, that black mark stays in your file for seven years.
This is a disappointment to many who mistakenly let a payment due date slip through the cracks. What about just closing the account to redeem your credit? Nope, closed accounts with negative information stay on your credit report for seven years from your original delinquency date.
A special situation is getting behind on federal student loan payments. It’s not reported to the credit bureaus until you’re more than 90 days past due. However, if you miss payments for nine months, you’re considered in default and the entire unpaid balance of your loan, plus interest, becomes due immediately.
Not paying a federal loan is very serious for your credit and financial life. In addition to the acceleration of your balance, there are many negative consequences including losing the ability to choose a repayment plan, get a loan deferment, or qualify for additional student aid. Plus, your tax refunds, federal benefits, and a portion of your wages can be withheld to pay off a past due federal loan.
So always contact your federal loan servicer the moment you know that you can’t make a payment. They can help you choose the best option for your financial situation.
5. Charge off
If you’re seriously behind on paying a debt, such as over six months past due, a creditor may update the account status to a charge off. This is an accounting term that means a creditor gave up on trying to collect a debt and reclassified it from a receivable to a loss.
Having a charge off account means that’s it’s officially closed, but that you still owe the balance, and it stays on your credit report for seven years.
Having a charge off account means that’s it’s officially closed, but that you still owe the balance, and it stays on your credit report for seven years. If you pay it, the status changes to “paid charge off,” but remains for seven years from the original delinquency date.
Remember that your credit report is a living history that continues to show open and closed accounts for a set period. Having a charge off is considered negative, but it affects your credit scores less as time passes.
See also: 12 Credit Myths and Truths You Should Know
6. Collections
When a creditor charges off a debt, they typically don’t stop trying to collect it. The next step is to turn a past due account over to a collections agency that either buys it or gets paid a cut of what they collect.
Your account status changes to “in collections” or shows a transfer to a new creditor. Or you may see two entries on your credit report for the same account: one with the original creditor that shows a zero balance and one with the new creditor for the amount owed.
A collections account gets reported for seven years from your first delinquency date with the original creditor. As you can probably guess, even paying off an account in collections doesn’t make it vanish. It remains on your credit report for seven years, unless the law in your state requires a shorter period.
However, just like with other negative items, the more time passes after paying off a bad debt, the less it affects your credit scores. Having a paid collection account can be viewed more favorably than one you never paid.
In fact, some newer credit scoring models may exclude paid collections and medical bill collections in score calculations, even if they still appear on your credit reports. That makes it more likely to get approved for a large credit purchase, such as a home or car, even with medical bills or a paid collection in your past.
Some newer credit scoring models may exclude paid collections and medical bill collections in score calculations, even if they still appear on your credit reports.
7. Settlement
A settlement is an account that you agree to pay for less than the full amount owed. It’s not as negative for your credit as an unpaid account, but isn’t as good as paying as you originally agreed.
A settlement stays on your credit report for seven years from the reported date or seven years from the date the account first became delinquent. As with other negative items, a settled account hurts your credit less as it ages.
8. Voluntary surrender
If you take out a loan that’s secured by property, such as real estate or a vehicle, you agree that if you don’t pay the loan, the lender can take the asset to help repay your debt. But if you have a financial hardship and decide that you want to return the property to the lender, that’s called a voluntary surrender.
For example, some people would rather give back their car or boat instead of forcing the lender to pursue a repossession. Problem is, you typically still owe the debt, even if you return the property to your creditor.
If a lender can sell the property, their profit is typical less than what you owe. In that case, you’re still responsible for the difference, which is known as a deficiency balance. The lender may send the deficiency account to a collections agency. As I previously mentioned, a collection account is listed on your credit reports for seven years from the date you became past due with the original creditor.
And if the creditor goes a step further and takes legal action to collect the deficiency with a judgment against you, as I previously mentioned, it appears in the public records section of your credit reports for a maximum of seven years.
9. Foreclosure
If you’ve had many months of late payments on a home mortgage, your lender can use foreclosure to take ownership of your property to help repay your debt. Once proceedings begin, the account is updated to show a foreclosure status.
Like most negative items on your credit report, a foreclosure is listed for seven years from the original date you became past due. It has a significant negative effect on your credit scores during that time, even if you get caught up on loan payments.
Like most negative items on your credit report, a foreclosure is listed for seven years from the original date you became past due. It has a significant negative effect on your credit scores during that time, even if you get caught up on loan payments.
If you can’t pay a mortgage as agreed, doing a “short sale” may be slightly less harmful for your credit. A short sale of real estate is when you sell it for less than you owe, with the lender’s approval. However, a lender may still hold you responsible for a deficiency balance.
If you negotiate a short settlement, where a mortgage lender agrees to accept less than the original amount owed, it’s shown on your credit report as “settled” for seven years.
How Negative Items Are Removed from Credit Reports
Once the reporting period for a credit account or a public record item has expired, the credit bureau automatically deletes if from your file. You don’t need to submit a request for it to be removed, but it’s a good idea to double check by pulling a copy of your credit reports.
You may be wondering if you can negotiate with a creditor or collections agency to remove a negative (but accurate) item faster. In most cases, this is against their agreement with the credit bureaus to report accurate and complete data about you.
While it doesn’t hurt to ask for negative information to be deleted as part of a debt settlement, it doesn’t typically happen unless there are extenuating circumstances, such as a billing error.
To sum up, just about every negative item on a credit report remains there for seven years. The exceptions are a Chapter 7 bankruptcy which remains for 10 years, and an unpaid tax lien which can stay 10 years or longer, depending on the laws in the state where you live.
So, do everything in your power to keep black marks off your credit history in the first place and protect your credit.
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