Your credit score or financial health is the most critical factor if you want to apply for a student loan, buy a home, or even rent an apartment. Your credit score basically determines if you are credible enough to pay back the loan you are borrowing today. While most Americans are familiar with the importance of a good credit score, they are often not sure how to work their way out of a bad score or negative information affecting the score.

It’s also crucial to learn how to read your credit report once you have it. Sometimes it may reflect an unpaid debt, which may be incorrect or may not exist in the first place. Therefore, it’s a good idea to swing by the report to one of our representatives who may be able to help interpret your scores better.

Our CEO, Joe Chavarria, critically analyzes an article from Overall, it’s a pretty well-written article in his view, but it lacks some useful information the reader may be interested in. While the article mentions that it will discuss how long each negative item will impact an individual’s score but forgets to cover it eventually.

Joe, therefore, describes the crucial information and helps the reader. Most negative items are deleted after seven years from a person’s credit report. Generally, the banks are willing to issue a home loan after three years of foreclosure by any individual. While collections will remain on the report for up to seven years, but they are the most impactful for the first 12 months, which means they are most likely to have a negative impact on your financial health.

In this article today, we will not just touch upon the factors that reflect on a good or bad FICO score but also discuss the timelines when the same factors will no longer impact your score or be entirely off the report.
Lenders look at FICO scores besides a person’s credit report before extending loans. FICO scores range between 300-850, and generally scores above 650 are considered good. Let’s look into how long each of the following negative items stays on the credit report and might impact an individual’s credit score.

1. Hard Inquiries

Hard inquiries are on the report for up to 2 years but are only scored for the first 12 months.

2. Late Payments

Late payments are the payments that were delayed by 30-day, 60-day or 90-day periods. These late payments will be reflected for up to 7 years on your report. These are most impactful for the first 24 months.

3. Foreclosures

If the applicant has had any foreclosures in the past, these will remain on the report for up to 7 years. This information severely impacts the FICO 8 and FICO mortgage scores.

4. FICO 8

It’s the score model that most credit card companies are using to determine whether or not to open up credit card lines of applicants.

5. FICO Mortgage

A foreclosure will most likely have the highest impact on the FICO Mortgage Score. If we think from the lender’s perspective, the one risk they are trying to cover is against the borrower’s inability to pay back the mortgage. Therefore, a previous foreclosure will badly impact a FICO mortgage score. Most lenders will approve a loan if the foreclosure is 2 to 3 years old, while other factors are still positive on the credit report.

6. Collections

Collections stay on the report for seven years but are most impactful for the first 12 months of the 24 months. These are still impactful until year three and four and less impactful in year five, but after that, they are off the individual’s credit report.

7. Bankruptcies

Bankruptcies’ stay for life as these records are public records. However, the bankruptcies stay on the credit report for up to 7 years.  Anything like a judgment or tax lien is public records for life. Next, the article questions, does the consumer still have to pay the debt even after it stops to reflect on the credit report? The answer is yes! If the debt collector decides to pursue the debt, it can do so even 15 or 20 years later.

8. Statute of Limitations

The statute of limitations varies by different areas, but in Texas for instance, it is four years. After this timeframe, it is known as outside the statute of limitations. So a good question before you decide to pay a debt is, what should you do? Joe advises making sure that the debt is legally yours. This is where services like ours can be helpful, as the average consumer may not know how to verify if the debt is legally theirs.

9. Fair Credit Reporting Act

What does the Fair Credit Reporting Act say? After seven years, negative information should no longer be reflected in the report. This seven-year period starts from the date the first payment was missed.

Let’s elaborate on this with the help of an example. Suppose that you are a borrower, and you took a loan from Wells Fargo in February 2013, and you missed a payment starting March, but you fixed it six months later in October, and next year you again went overdue for 60 days in June 2014. If you are wondering what date will be considered as the date of the missed payment, then it will be the date of the last missed payment or from the most recent period.

9. Positive Information

Now finally, the good news is that the positive information stays on the report for the longest duration. If there are any good accounts that you held 15 years ago and you made your payments on time, it will reflect positively even 15 or 20 years later. Stay tuned for more useful reads on our website.