It shocks me when I hear someone lackadaisically say, in seven years this debt will be gone. I think to myself, are you really not planning to use your credit for the next seven years?
No, financing of any major purchases in seven whole years, nothing, nada?? Once I get over my initial shock, I begin explaining how the Seven Year Debt Removal Rule of the Fair Credit Reporting Act (FCRA) actually impacts your purse. The FCRA states that “most negative items must be removed seven years from the first date of delinquency and not the date that you applied for the debt. Aside, from those specifications there are also some exceptions to this seven year rule like:
- Bankruptcy filings (10 years).
- Judgments (seven years or until the state statute of limitations expires, whichever is longer).
- Money owed to or guaranteed by the government (unpaid taxes or student loans stay on your report indefinitely or until seven years from the date paid).
So, if you believe that in seven years your debt(s) will mysteriously find its way off your credit report and into File 13, do not bet your purse on it! The seven-year Fair Credit Reporting Act speaks to the reporting life of a debt and not how long a debtor can actually pursue you for the money owed.
Another thing to consider with the FCRA rules and debt reporting is that your state’s statute of limitations also plays a role in how long a debt can be collected using the court. Even if an unpaid debt no longer appears on your credit report, it does not mean you’re in the clear. There is also “stale debt” in which old debt is sold to a new owner (buyer) and attempts to collect may still be made.
So, in short the best way to boost your score and qualify for the best lending rates is to financially satisfy the total debt and/or an amount that you have agreed upon.