Most people are unaware of exactly how long credit items will remain on a credit report. It is actually very "One Sided". The "Fair Credit Reporting Act" (FCRA) mandates the duration of time negative credit items can remain on your credit report. The sad part is that the Credit Reporting Agencies (CRA's) benefit from collecting and leaving these negative items on your file. A common myth it that CRA's are run by The Government. This is False! CRA's are merely clearing houses that make their money compiling and selling "Your" information. Private companies pay CRA's to provide them with information to determine your worthiness to obtain credit or career positions. Without negative information, CRA's would go out of business!

Bad debt remains on your credit report for 7 years from the date of last activity. Other items such as Bankruptcy or Civil Liabilities can remain for up to 10 years from the date of last activity. Do Not Be Fooled! A bad debt can remain on your credit report forever if you are not aware of the rules.

For Example: If you stopped paying for your VISA Card on January 1st, 1995, your credit would not come off on January of 2002 as you might think. It is interpreted that negative credit shall not be reported after 7 years from the last activity on the account. This means that it is required to be removed 7 years after it has been charged off by the credit grantor. Also, if you decide to buy a house and the mortgage underwriter requires you to pay the balance of the outstanding debt; The 7 years starts all over again. The only difference: "PAID CHARGE OFF" will now appear on your credit for 7 more years. This is still a negative remark.

Bankruptcies:
Will be reported for 10 years from the date of entry for relief.

Suits & Judgments:
May be reported for seven years from the date of entry or expiration of applicable statute of limitations, whichever is greater.

Tax Liens – Paid:
May be reported seven years from the date of entry.

Tax Liens – Unpaid:
There is no limitation on the reporting of unpaid tax liens.

Collection Items:
Information may be reported for seven years, beginning 180 days after the date of delinquency, which immediately preceded the collection activity.

Charge-off to Profit and Loss:
Information may be reported for seven years, beginning 180 days after the date of delinquency, which immediately preceded the charge-off.

Criminal Record Limitations:
There is no limitation on reporting information on criminal convictions.

Other Adverse Information:
May be reported for seven years.

2.What is a credit report?

A consumer credit report is a document that contains a record of an individual's credit payment history. Credit grantors are permitted by law to review your credit report to objectively determine whether to grant you credit.

A consumer credit report contains four types of information: identifying information, credit information, public record information, and inquiries. Identifying information includes your name, current and previous addresses, social security number, year of birth, current and previous employers, and your spouse's name if you're married. Credit information includes credit accounts or loans you have with banks, retailers, credit card issuers, and other lenders. Public record information includes any information that's contained in state and county records such as bankruptcies, tax liens, and monetary judgments. Inquiries indicate to other credit grantors that you have applied for new credit that could result in additional debt.

Positive credit information remains on your report indefinitely, although information about an account will cycle off your report if no new information is reported about it for seven years. Most negative information remains for up to seven years. Bankruptcies can remain on your credit report up to ten years. Most inquiries stay on your credit report for up to two years.

3. What is a credit bureau?

A credit bureau or credit reporting agency is in the business of gathering, maintaining, and selling information about consumers' credit histories. It collects information about consumers' payment habits from credit grantors like banks, savings and loans, credit unions, finance companies, and retailers. The credit bureau stores this information in a computer database and sells it to credit grantors in the form of credit reports.

Although credit-reporting agencies provide your credit report to lenders when you apply for credit, they do not make actual lending decisions. It is up to individual lenders to evaluate your credit report and any other factors they consider important and then decide whether or not to offer you credit.

4. What is a credit score/FICO score?

Simply put, credit scores are three-digit numbers increasingly used by lenders when evaluating credit worthiness. Insurers, employers, and landlords also use the scores to evaluate applications they receive. Scores range from 300 to 850. Only about 11% of the surveyed population ranks above 800; 29% ranks between 750 and 799.

In 1956 Bill Fair and Earl Isaac founded the Fair, Isaac and Co. This was the first of it's kind, pioneering the "credit score" for financial companies and lenders. Over the years, they expanded the field to incorporate decision systems, analytics, and consulting service. Now credit agencies and most lending companies use software from FICO (Beacon) or an in-house software system using elements from the FICO rating system, to calculate your credit score.

5. How is my credit score/FICO score calculated?

There are several factors that go into determining your credit score. These include the length of your credit history, number of open accounts, loans, mortgages, and public records. Basically, the rating system is designed to provide a snapshot of your current credit risk to lenders. This is meant to aid them in making decisions based on your credit worthiness. A lender's main objective is to assess how much of a credit risk you pose.

Regardless of whether the FICO rating system is used or an in-house credit rating system is used, they are all based on the industry standard three-digit score. This score places the borrower in one of three main groups.

Prime
You are considered a "prime" borrower if your credit score is above 680. If you are in this group, you will not have a problem securing a good interest rate on your mortgage, car loan, or credit card.

Sub-prime
You are considered a "sub-prime" borrower if your credit score is 560-680. Borrowers in this group tend to pay a much higher interest rate on your loan.

Out of luck!
You are basically out of luck if your score is less than 560. Lenders are likely to turn you away. Credit card companies will stick you with astronomical interest rates and likely require you to provide a security deposit or charge you a high up-front fee. If you have a score less than 560, you may be out of luck when shopping for insurance coverage or applying for a job with many companies.

The Fair Credit Reporting Act (FCRA) guarantees your right to dispute inaccurate information in your credit report, so if any of the problems you've had are due to inaccurate information, you can file a dispute to have it corrected or removed.

The FCRA protects consumers in dispute situations, mandating that the credit reporting agencies must respond to your dispute by initiating an investigation and collecting evidence (where possible) from your creditors. If the information is inaccurate, the credit reporting agencies must either remove or correct the disputed information.

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7. Why your credit matters?

Million's of people in the United States have credit blemishes severe enough (credit score less than 620) to make obtaining loans and credit cards with reasonable terms difficult. Or maybe your credit is OK, but you'd like to make it even better. After all, the better your credit, the lower the interest rates you can secure on credit cards, car loans, and mortgages. Even insurance companies, landlords, and employers are looking at consumer's credit scores now to evaluate the applications they receive.