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Time Limits on Reporting and The FCRA

Justice _scaleWhen reviewing your credit report in an effort to raise your credit score, you might've wondered about the 7-year clock. Many consumers aren't sure if making a payment on a negative account in full that is already scheduled to fall off your report will restart the 7-year clock all over again.

The language of the Fair Credit Report Act ("FCRA") reads as follows: 

"The 7-year (credit reporting) period referred to in paragraphs (4) and (6) 6 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”  15 U.S.C. § 1681c(1)

The break-down:

In plain language, the statute states that a collection account can remain on your credit file for 7 years from the date the account was charged off or for 7 and a half years from the date the first delinquency occurred.  Nowhere in the Act does it state that a debt can be re-aged after a lump sum payment is made, payment in full or sale to another collection agency allowing the account to be reported for an additional 7 years and thus further damaging your score. 

What’s the law for?

This law requiring derogatory items be removed from your credit report after seven years is designed to aid consumers to recover from past credit mistakes and help rebuild your credit score.  An important factor to consider and clearly understand when discussing this 7-year clock is the difference between the statute of limitations and permissible length of time for reporting a delinquent account.

Statute of limitations

Statute of limitations ("SOL") are state laws that set a defined length of time under which you may be sued or file suit.  These lengths of times vary depending on what state you live in and the type of debt you are being sued for.  For a complete list of the statutes by state visit our website.  

Remember, once the statute of limitations has passed it does not mean a collector cannot sue you, it simply provides you with an absolute defense to the lawsuit.  In other words, if a lawsuit is received and the statute of limitations may have passed, action must be taken to defend the case.

The 7-year period and the “SOL”

Under the FCRA 15 U.S.C. §1681c, an account in collection can appear on a consumer's credit report for 7 and a half years from the date of first delinquency on the account.  Subsequent activity, for example payment on the account, is irrelevant to the seven-year period. 

It may, however, restart the statute of limitations in your state. There are a few exceptions to this rule: bankruptcy may be reported for ten years from the date of the final order; tax liens may be reported for 7 years from the date of payment; federal student loans can be reported indefinitely or for as long as they are delinquent.

Paying off your debts will only help your score

It is important to understand that because a negative item is removed from your report or may never have been reported in the first place it does not mean that the statute of limitations for filing suit and obtaining a judgment has passed.  The FCRA and statute of limitations laws are independent of one another.  

In conclusion, the short and simple answer is that paying off your debts will not negatively affect your credit score by re-starting the reporting clock.  You can only help your score and clean up your report by paying off your debts. 

The 7-year reporting rule is only applicable to negative items on your credit report and not to accounts in good standing.  Positive accounts can remain on your credit file for an indefinite amount of time even after they have been closed and paid in full. 

Who are we?

SmithMarco, P.C. has been protecting consumer rights since 2005 and handles Fair Credit Reporting Act cases.  If information about you is inaccurately being reported, or if you feel that your rights have been violated, please contact us for a free case review.

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