Credit report/REPORTING
TIME: HOW LONG CAN BAD CREDIT REMAIN
Complete explanation of the negative
credit reporting time
This is one of the most talked about topics
in the credit world, especially by consumers afflicted with
bad credit. After a couple of years, consumers start to realize
the impact of bad credit and that the
7 year period starts seeming like it will never end. It's
almost like you have gone on, had kids, changed jobs, got
married etc.. and that bad credit mark is still there! That's
when people start asking "how long?" We'll hopefully
answer that for you in layman's terms yet give you the backup
documentation of the statute to validate our opinion. You
also should read the FCRA
plus your own state statute
to determine state specific rules because the federal
statute (FCRA) doesn't always outweigh the state statute.
When a debt becomes seriously delinquent
it is important to consider the time limitations for how long
the debt is allowed to be reported on your credit reports.
The FCRA has been around since the 1970's but the provisions
were amended in September 1997. Therefore it is important
to take into consideration if your debt was charged off before
1996 or after.
Prior to 1997 any account activity
could extend the reporting period so creditors and collectors
took advantage of this loophole to keep negative items on
a consumer's report for many years. Remember however that
each state has its own
statute so those statute's do apply to the actual reporting
time.
In General: We are going to use California
statute as an example here. To get the exact statute to figure
reporting time for your state go here
and click on your state. Once there click on civil code and
look under "Obligations of a Consumer Credit Reporting
Agency." You will find the statute's that apply to
your particular state.
State Rule
Reporting time: Section 1785.13. of the Calif. Civil Code
-Good credit stays for 10 years and
then it is aged off but can stay longer.
-Bankruptcies that, from the date of adjudication,
(means decision) antedate (means predate) the report by more
than 10 years.
-Collection accounts and charge offs remain
for 7 years from first serious delinquency or charge
off date. (NOT the last date of activity.)
-Paying an old debt does NOT reset the clock
on reporting for another 7 years. (See
this article for full details of this rule. Very important.)
-Suits
and judgments that, from the date of entry or renewal, antedate
(predate) the report by more than seven years or
until the governing statute of
limitations has expired, whichever is the longer period.
-Paid tax liens that, from the date of payment,
antedate the report by more than seven years. (Paid tax liens
are reported for 7 years from date paid not filed!
So pay them quickly!)
-Records of arrest, indictment, information,
misdemeanor complaint, or conviction of a crime that, from
the date of disposition, release, or parole, antedate the
report by more than seven years. These items of information
shall no longer be reported if at any time it is learned that
in the case of a conviction a full pardon has been granted,
or in the case of an arrest, indictment, information, or misdemeanor
complaint a conviction did not result.
-Any other adverse information that antedates
the report by more than seven years.
-The seven-year period specified
in paragraphs (5) and (7) of subdivision (a) shall commence
to run, with respect to any account that is placed
for collection (internally or by referral to a third party,
whichever is earlier), charged to profit and loss, or subjected
to any similar action, upon the expiration of the 180-day
period beginning on the date of the commencement of the delinquency
that immediately preceded the collection activity, charge
to profit and loss, or similar action. Where more than
one of these actions is taken with respect to a particular
account, the seven-year period specified in paragraphs (5)
and (7) shall commence concurrently for all these actions
on the date of the first of these actions. (What this means
is that the creditor must report the charge off date truly
and no-reage it or attempt to extend it).
-A consumer credit report shall not include
any adverse information concerning a consumer antedating the
report by more than 10 years or that otherwise is prohibited
from being included in a consumer credit report.
-Consumer credit reporting agencies shall
not include medical information in their files on consumers
or furnish medical information for employment or credit purposes
in a consumer credit report without the consent of the consumer.
-Child support: A consumer credit reporting
agency shall include in any consumer credit report information,
if any, on the failure of the consumer to pay overdue child
or spousal support, where the information either was provided
to the consumer credit reporting agency pursuant to Section
4752 or has been provided to the consumer credit reporting
agency and verified by another federal, state, or local governmental
agency.
-Every consumer credit reporting agency
shall maintain reasonable procedures designed to avoid violations
of this statute and to limit furnishing of consumer credit
reports to the purposes listed under Section 1785.11
That is an excerpt from the California Code
on credit reporting time limitations and if you live in California
that would be the code you would review. The
federal code always rules unless it offers less
protection to the consumer than state. You should review your
state code then review federal and see if there are any major
differences and if there are, the one with the best consumer
protection would rule.
Federal rule on credit reporting timelines
§ 605. Requirements relating
to information contained in consumer reports [15 U.S.C. §
1681c]
(a) Information excluded from consumer reports.
Except as authorized under subsection (b) of this section,
no consumer reporting agency may make any consumer report
containing any of the following items of information:
(1) Cases under title 11 [United States
Code] or under the Bankruptcy Act that, from the date of entry
of the order for relief or the date of adjudication, as the
case may be, antedate the report by more than 10 years.
(2) Civil suits, civil judgments, and records
of arrest that from date of entry, antedate the report by
more than seven years or until the governing statute of
limitations has expired, whichever is the longer period.
(3) Paid tax liens which, from date of payment,
antedate the report by more than seven years.
(4) Accounts placed for collection or charged
to profit and loss which antedate the report by more than
seven years.
(5) Any other adverse item of information,
other than records of convictions of crimes which antedates
the report by more than seven years. (b) Exempted cases.
The provisions of subsection (a) of this section are not applicable
in the case of any consumer credit report to be used in connection
with;
(1) a credit transaction involving, or which
may reasonably be expected to involve, a principal amount
of $150,000 or more;
(2) the underwriting of life insurance involving,
or which may reasonably be expected to involve, a face amount
of $150,000 or more; or (3) the employment of any individual
at an annual salary which equals, or which may reasonably
be expected to equal $75,000, or more.
(c) Running of reporting period.
(1) In general. The 7-year period referred
to in paragraphs (4) and (6)(2) of subsection (a) shall
begin, with respect to any delinquent account that
is placed for collection (internally or by referral to a third
party, whichever is earlier), charged to profit and loss,
or subjected to any similar action, upon the expiration of
the 180-day period beginning on the date of the commencement
of the delinquency which immediately preceded the collection
activity, charge to profit and loss, or similar action.
(2) Effective date. Paragraph (1) shall
apply only to items of information added to the file of a
consumer on or after the date that is 455 days after the date
of enactment of the Consumer Credit Reporting Reform Act of
1996.
(d) Information required to be disclosed.
Any consumer reporting agency that furnishes a consumer report
that contains information regarding any case involving the
consumer that arises under title 11, United States Code, shall
include in the report an identification of the chapter of
such title 11 under which such case arises if provided by
the source of the information. If any case arising or filed
under title 11, United States Code, is withdrawn by the consumer
before a final judgment, the consumer reporting agency shall
include in the report that such case or filing was withdrawn
upon receipt of documentation certifying such withdrawal.
(e) Indication of closure of account by
consumer. If a consumer reporting agency is notified pursuant
to section 623(a)(4) [§ 1681s-2] that a credit account
of a consumer was voluntarily closed by the consumer, the
agency shall indicate that fact in any consumer report that
includes information related to the account.
(f) Indication of dispute by consumer. If
a consumer reporting agency is notified pursuant to section
623(a)(3) [§ 1681s-2] that information regarding a consumer
who was furnished to the agency is disputed by the consumer,
the agency shall indicate that fact in each consumer report
that includes the disputed information.
You can see that the state statute above
does not conflict with the federal and both offer pretty equal
protection therefore you can cite either because there is
no direct conflict. **Also see our
statute of limitations page to find out if your debt has
expired to be legally collected. Collection
time and reporting time are different.
Further Proof....
Here is an opinion from the FTC
on this exact issue and should really clear up any concerns
about re-aging debts or a payment extending the reporting
time.
TIME LIMITS
1. What reporting limits does the FCRA provide with respect
to chargeoffs, and how long have they been in effect?
Answer: Section 605(a)(4), which has been
in effect since the FCRA became effective in April 1971, has
always prohibited CRAs from reporting chargeoffs that are
more than seven years old.(1) Section 623(a)(5),
which became law in September 1997, requires a creditor that
reports a charge off to a CRA to notify the agency (within
90 days of reporting the account) of "the month and year
of the commencement of the delinquency that immediately preceded"
the charge off. Section 605(c)(1) provides that the
seven year period begins 180 days from that date. Both provisions
were part of the major revision to the FCRA that were enacted
in 1996.(2)
2. Is the reporting period extended if (A)
the original creditor sells or transfers the account to another
creditor, (B) the consumer responds to post-charge off collection
efforts by making a payment on the debt, or (C) the consumer
disputes the account with a CRA? Does it matter whether the
7-year period has expired when any of these events occurs?
Answer: No. In enacting the new provisions
discussed above, Congress intended to establish a date certain
-- 180 days after the start of the delinquency that led to
the charge off -- to begin the obsolescence period. It did
so to correct the often lengthy extension of the period that
resulted from later events under the original FCRA.
Here are two staff opinion letters (Kosmerl,
06/04/99; Johnson,
08/31/98) that discuss the impact of these provisions, and
the legislative history relating to their enactment, in more
detail. Because the commencement of the seven year period
is now described with some precision by the statute, it is
our opinion that none of the subsequent events you listed
-- sale of the charged off account by the creditor, or
a payment on or dispute about the account by the consumer
-- changes the allowable period for a CRA to report a charge
off.
3. Since Sections 623(a)(5) and 605(c)(1)
provide new rules for calculating the 7-year period that became
effective in 1997, do charge off accounts now have different
obsolescence periods depending on when the charge off occurred?
Answer: Yes. Section 605(c)(2) states that
the section "shall apply only to items of information
added to the (CRA) file of a consumer on or after" 455
days after enactment, or December 29, 1997. Therefore, a charge
off reported to a CRA on or after that date is subject to
the new commencement-of-the-delinquency method of calculating
the obsolescence period set forth in Sections 623(a)(5) and
605(c)(1). On the other hand, a charge off reported to a CRA
before December 29, 1997, is not covered by the new provisions,
as discussed in (Kosmerl,
06/04/99). If a credit account was reported as a charge off
before that date, the Commission's view has been that it can
be reported for seven years from the date the creditor
actually charged it off.
Reasonable Procedures for CRA:
Whenever a consumer credit reporting agency prepares a
consumer credit report, it shall follow reasonable procedures
to assure maximum possible accuracy of the information concerning
the individual about whom the report relates. These reasonable
procedures shall include, but not be limited to, permanent
retention by the consumer credit reporting agency in the consumer's
file, or a separately individualized file, of that portion
of the data in the file that is used by the consumer credit
reporting agency to identify the individual consumer pursuant
to paragraph (1) of subdivision (a). This permanently
retained data shall be available for use in either a reinvestigation
pursuant to subdivision (a) of Section 1785.16, an investigation
where the consumer has filed a police report pursuant to subdivision
(k) of Section 1785.16, or a restoration of a file involving
the consumer.
If the permanently retained identifying
information is retained in a consumer's file, it shall be
clearly identified in the file in order for an individual
who reviews the file to easily distinguish between the permanently
stored identifying information and any other identifying information
that may be a part of the file. This retention requirement
shall not apply to data that is reported in error, that is
obsolete, or that is found to be inaccurate through the results
of a reinvestigation initiated by a consumer pursuant to subdivision
(a) of Section 1785.16.
Credit Reports: What Information Providers are
responsible to do
Many consumers believe that the time of
reporting can be extended by the furnisher of information
(creditor). Often, consumers are told that the account can
be reported for say, 7 years, then later they are told the
account was re-aged or had some type of activity that led
to a longer reporting time. Not true, it cannot be extended!
To solve this dispute, below is the Federal Trade Commissions'
view on the responsibility of these furnishers.
The Fair Credit Reporting Act (FCRA) is
designed to protect the privacy of credit report information
and to guarantee that information supplied by consumer reporting
agencies (CRAs) is as accurate as possible. If you provide
information to a CRA, such as a credit bureau, be aware that
amendments to the law spell out new legal obligations. These
amendments were effective September 30, 1997.
Does the FCRA Affect Me?
If you report information about consumers to a CRA, you are
considered a "furnisher" of information under the
FCRA. CRAs include many types of databases -- credit bureaus,
tenant screening companies, check verification services, and
medical information services -- that collect information to
help businesses evaluate consumers. If you provide information
to a CRA regularly, the FCRA requires that the CRA send you
a notice of your responsibilities.
What Are My Responsibilities?
The responsibilities of information providers are found in
Section 623 of the FCRA, 15 U.S.C. §1681s-2, and are
explained here. Items 2 and 5 apply only to furnishers who
provide information to CRAs "regularly and in the ordinary
course of their business." All information providers
must comply with the other responsibilities.
1. General Prohibition on Reporting Inaccurate
Information - Section 623(a)(1)(A) and Section 623(a)(1)(C).
You may not furnish information that you know -- or consciously
avoid knowing -- is inaccurate. If you "clearly and conspicuously"
provide consumers with an address for dispute notices, you
are exempt from this obligation but subject to the duties
discussed in Item 3. What does "clear and conspicuous"
mean? Reasonably easy to read and understand. For example,
a notice buried in a mailing is not clear or conspicuous.
2. Correcting and Updating Information --
Section 623(a)(2).
If you discover you've supplied one or more CRAs with incomplete
or inaccurate information, you must correct it, resubmit to
each CRA, and report only the correct information in the future.
3. Responsibilities After Notice of a Consumer
Dispute from a Consumer --Sections 623(a)(1)(B) and 623(a)(3).
If a consumer writes to the address you specify for disputes
to challenge the accuracy of any information you furnished,
and if the information is, in fact, inaccurate, you must report
only the correct information to CRAs in the future. If you
are a regular furnisher, you also will have to satisfy the
duties in Item 2. Once a consumer has given notice that he
or she disputes information, you may not give that information
to any CRA without also telling the CRA that the information
is in dispute.
4. Responsibilities After Receiving Notice
from a Consumer Reporting Agency -- Section 623(b).
If a CRA notifies you that a consumer disputes information
you provided:
You must investigate the dispute and review
all relevant information provided by the CRA about the dispute.
You must report your findings to the CRA. If your investigation
shows the information to be incomplete or inaccurate, you
must provide corrected information to all national CRAs that
received the information. You should complete these steps
within the time period that the FCRA sets out for the CRA
to resolve the dispute -- normally 30 days after receipt of
a dispute notice from the consumer. If the consumer provides
additional relevant information during the 30-day period,
the CRA has 15 days more. The CRA must give you all relevant
information that it gets within five business days of receipt,
and must promptly give you additional relevant information
provided from the consumer. If you do not investigate and
respond within the specified time periods, the CRA must delete
the disputed information from its files.
5. Reporting Voluntary Account Closings
-- Section 623(a)(4).
You must notify CRAs when consumers voluntarily close credit
accounts. This is important because some information users
may interpret a closed account as an indicator of bad credit
unless it is clearly disclosed that the consumer -- not the
creditor -- closed the account.
6. Reporting Delinquencies
-- Section 623(a)(5).
If you report information about a delinquent account that's
placed for collection, charged to profit or loss, or subject
to any similar action, you must, within 90 days after you
report the information, notify the CRA of the month and the
year of the commencement of the delinquency that immediately
preceded your action. This will ensure that CRAs use the correct
date when computing how long derogatory information can be
kept in a consumer's file.
How do you report accounts that you have
charged off or placed for collection? For example:
A consumer becomes delinquent on March 15,
1998. The creditor places the account for collection on October
1, 1998. In this case, the delinquency began on March 15,
1998. The date that the creditor places the account for collection
has no significance for calculating how long the account can
stay on the consumer's credit report. In this case, the date
that must be reported to CRAs within 90 days after you first
report the collection action is "March 1998."
A consumer falls behind on monthly payments
in January 1998, brings the account current in June 1998,
pays on time and in full every month through October 1998,
and thereafter makes no payments. The creditor charges off
the account in December 1999. In this case, the most recent
delinquency began when the consumer failed to make the payment
due in November 1998. The earlier delinquency is irrelevant.
The creditor must report the November 1998 date within 90
days of reporting the charge-off. For example, if the creditor
charges off the account in December 1999, and reports this
charge-off on December 31, 1999, the creditor must provide
the month and year of the delinquency (i.e., "November
1998") within 90 days of December 31, 1999.
A consumer's account becomes delinquent
on December 15, 1997. The account is first placed for collection
on April 1, 1998. Collection is not successful. The merchant
places the account with a second collection agency on June
1, 2003. The date of the delinquency for reporting purposes
is "December 1997." Repeatedly placing an account
for collection does not change the date that the delinquency
began.
A consumer's credit account becomes
delinquent on April 15, 1998. The consumer makes partial payments
for the next five months but never brings the account current.
The merchant places the account for collection in May of 1999.
Since the account was never brought current during the period
that partial payments were made, the delinquency that immediately
preceded the collection commenced in April 1998 when the consumer
first became delinquent.
Some
portions from ftc.gov
|
