Your credit report is designed to give prospective lenders a detailed picture of your financial history. Lenders use the data in your report to establish whether you're a good credit risk and worthy of a credit offer. They're not interested in information that has no relevance to the way you manage credit today -- a missed payment 20 years ago has no bearing on your current behavior. Most information on your report is held for only seven years.
The Seven -Year Rule
The Fair Credit Reporting Act limits the amount of time credit bureaus can report negative financial information to about seven years. This includes late payments, discharged Chapter 13 bankruptcies, foreclosures, debt collection and paid government tax liens. Typically, the seven-year reporting period starts from the date of the last scheduled payment before your account becomes delinquent, not the date you pay off the debt. Late payments continue to show for the full seven years, even if you make subsequent payments on time. Positive information may be reported indefinitely.
Exceptions to the Rule
The seven-year rule has a few exceptions. Chapter 7 bankruptcies, for example, may be reported for up to 10 years. Information about indictments and arrests disappears after seven years, but criminal convictions stay on your credit report forever. Charge-offs hang around for seven years plus 180 days. Government debt, such as unpaid tax liens and defaulted, government-issued student loans remain on your report indefinitely.
When a creditor checks your credit in connection with an application for credit, the inquiry is noted in your report. These inquiries may be reported for seven years, though typically they are reported for just two years. Known as "hard inquiries," these queries may slightly lower your credit score. If you apply for credit of $150,000 or more or for a job with an annual salary of at least $75,000, the credit bureaus may report to your prospective lender or employer adverse information beyond the usual seven-year time limit. In practical terms, however, the credit bureau has probably deleted this information.
Old Information Has Less Impact
Black marks on your credit report influence creditor lending decisions until the reporting period of seven years expires. However, the older the negative item, the less impact it has on your credit score. For example, a missed payment that is four years old damages your score less than a missed payment that is four months old.
A former real estate lawyer, Jayne Thompson writes about law, business and corporate communications, drawing on 17 years’ experience in the legal sector. She holds a Bachelor of Laws from the University of Birmingham and a Masters in International Law from the University of East London.