Credit Time Limits
A subject of great concern to many of those with damaged credit is the
issue of time limits. The two main categories are collection-related
Collection Of Debts
Action - A creditor or third-party collection
agency can legally demand or request payment on a debt, via letters and
phone calls, forever, as long as the debt remains unpaid. A debtor can
order a third-party collector to cease communication, as per the Fair Debt Collection
Practices Act, which should stop routine demands from that
source. (See our Collection
Agency FAQ for details.) In practice, the older a debt is,
the less vigorous the collection efforts will be, and the more likely
the creditor or collector will give up easily. And, unless the debt is
secured by some type of property (e.g. a car), they cannot actually
force a debtor to pay without a lawsuit.
- When a consumer is seriously delinquent (late) on a debt for a
significant amount, there is the possibility of the creditor filing a
lawsuit. The time limit for doing so is known as the statute of
limitations, which is set by individual states. The relevant statute is
the one for the state in which the debtor resided at the time of the
delinquency. The expiration of the statute of limitations covering a
debt will not necessarily prevent a lawsuit, but it
will provide an absolute defense, whereby the debtor is simply required
to file a response with the court, pointing out this fact, in order to
have the suit dismissed. Here is a chart with the statute of
limitations for each state and type of debt.
- If a lawsuit has already been filed and won by a creditor, there is
another, separate statute of limitations for enforcing (collecting) the
judgement. Here is a chart with the judgement enforcement time
limits for each state.
Taxes - Ten years from the date of the
assessment for delinquent amounts, unless a lien has been filed. Tax
liens on, for example, real estate, remain until the back taxes have
Loans - There is no statute
of limitations or other time limit for lawsuits or other enforcement
action on defaulted federal student loans.
The time limits for various types of information
to appear on consumer credit reports are set by the federal Fair Credit Reporting Act.
Making payments or partial payments on bad debts
does not effect the running of the credit reporting
time limits, except in the case of tax liens and federal student loans.
All other types of items should expire on schedule, based on the
original dates, regardless of when or whether they are paid. There was
previously a great deal of confusion over the starting point, which
could have been interpreted as the date of the last activity on the
account. This resulted in the possibility of "re-setting the clock" on
an old bad debt by making a payment on it, or by paper-shuffling on the
part of collection agencies. The issue was clarified in the 1996
amendments to the FCRA, which set a specific starting date related to
the original delinquency date (see FCRA
Section 605 (c) (1).)
- Two years.
Payments - Seven years from the month in which
the late payment was due. If there are multiple late payments in one
account item, then they will each expire individually.
- Seven years. The time runs from the date of the delinquency, plus 180
days. If a payment was due on an account on January 1, 2000, but the
debtor defaulted, and never caught up to become current again, and the
account is eventually declared a charge-off by the creditor, then the
seven year reporting time limit starts running on July 1, 2000, with
the item scheduled to expire from his/her credit reports on July 1,
2007. Here is our article on
Accounts - Seven years. The running of this time
limit is the same as with charge-offs. The date of delinquency still
refers to the original delinquency with the original creditor,
regardless of when the collection agency began working the debt. This
includes debts that have been bought by a collection agency. Collection
agencies cannot legitimately "re-set the clock."
And Judgements - Seven years or until the
governing statute of limitations has expired, whichever is longer.
(Chapter 7) - Ten years (from the date of entry
of the order for relief or the date of adjudication.
(Chapter 13) - Seven years.
Tax Liens - Seven years from the date of payment.
Tax Liens - Forever (unless paid - see above.)
Federal Student Loans - Forever (unless paid,
after which they can appear for seven years.)
The above time limits apply to credit reports
which would be available to creditors for most types of credit
applications. However, the credit bureaus are legally permitted to
disclose older information in the following situations:
A credit application involving a principle loan
amount of $150,000 or more.
An application for a life insurance policy with a
payout of $150,000 or more.
An application for employment in a position paying
$75,000 per year or more.