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Just Ask Shannon – Seven Years or More

September 6, 2008

Seven Years or More…

Dear Shannon – Is it true that an unpaid debt will fall off my credit report after seven years? Anonymous, from Los Angeles, CA.

Dear Anonymous – That is a common source of confusion for many folks. Yes, it is true that an unpaid debt will be removed from your report after seven years; but, it could actually be as long as 7 years and 180 days – so 7.5 years. Keep in mind, how this rule applies depends on in what stage your account is.

Past Due Accounts

For accounts that are delinquent (say you missed a few payments here and there), the 7-year period begins on the date that you missed your last payment. So, if you missed a payment on your water bill on March 2008, the 7 years starts then. Assume that you start paying it again in June 2008 and then you stop again in October 2008. The 7-year period restarts again in October 2008 – the date of your last delinquency.

Charged-off Accounts

On the other hand, if your account is past being delinquent and has been sent to a collection agency or charged-off, the time period is 7 years and 180 days. This is calculated from the date of your last delinquency, too.

In the previous example, assume that the creditor sent your account to a collection agency in February 2006. The time period will start from October 2005, the date of your last delinquency; but it will last for 7.5 years.

Why 7.5 years? Basically, your creditors have an extra 180 days to report your account to the credit agency. This is meant to curb abuses by some creditors who tried to keep negative credit information on consumer reports past the 7-year period. Now creditors have 180 days to place your account in collections. If they go past the 180 days, your credit report will still only reflect the negative information for 7 more years.

What if you pay it off or make a settlement? The time period does not restart every time there is activity on your account. When you pay off the balance owed or make a payment plan with the creditor, this will not cause the 7.5-year period to start again. It will still start from the date of your last delinquency, which in this case was October 2005.

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