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From the Experts at Credit.com

Frequently Asked Questions About Credit Reports

August 8, 2013

Credit Report FAQ's

1. How long does negative information stay on your credit reports? I've heard "seven years."
2. Why are there 3 credit bureaus and how do they differ, if at all?
3. Should I pay off a judgment that is showing up on my credit report? If I do, and it is marked "paid," what will this mean?
4. Will all delinquent bills be reported to a credit bureau?
5. What are the top ways to re-build your credit score quickly?
6. Are there any legitimate ways to "repair" your credit and credit scores?
7. If I have absolutely new credit how soon can I see a credit score developing?
8. How many times can I pull my own credit report through services like www.credit.com before it impacts my credit score?
9. How much does having my credit checked by a credit grantor impact my score?

1. How long does negative information stay on your credit reports? I've heard "seven years."

The vast majority of both positive and negative information stays on your credit reports for no longer than seven (7) years from the date that activity on the account ceases. This can mean that the account has been closed or paid in full. Accounts such as credit cards and mortgages can stay on a credit report for well past seven years because those types of accounts commonly remain active for many years. There are, however, some notable exceptions to the "seven year rule",

  • Chapter 7 Bankruptcies - These will stay on your credit reports for up to 10 years from the filing date. Interestingly, the accounts that are included in this type of bankruptcy will have been removed from your credit reports years before the actual record of filing chapter 7 is removed.
  • Unpaid Tax Liens - These will stay on your credit report indefinitely. Yes, indefinitely. The only exception is in California where state law requires that they be removed no later than 10 years from the date it was filed.
  • Defaulted Student Loans - The 7 year rule does not apply to defaulted student loans that are government issued or guaranteed. These items can also stay on your credit report indefinitely.

So how can you be sure that these items will be removed when the time has come?

Each of the credit bureaus hard codes their credit reporting systems to look for the "purge from" dates. As these dates hit their 7 or 10 year anniversary they will automatically be removed. Unless you feel that the account has aged past its reporting time limit, there is no need to remind the credit bureaus that an item is to be removed. It is done automatically.

SPECIAL NOTE ABOUT COLLECTIONS: Collection agencies will often report debts to the credit bureaus in an attempt to collect from the consumer. This is perfectly legal as defined by the Fair Debt Collection Practices Act. The issue here is that, intentionally or not, collection agencies commonly report to the credit bureaus using a newer "purge from" date despite the fact that this is not allowed according to sections 605a4 and 605c1 of the Fair Credit Reporting Act. The result of this misreporting is that the collection item will remain on the credit file for greater than 7 years.

If you feel that you have a collection account that has been reported for more than 7 years from the date your creditor began sending you collection notices you should contact the credit bureaus and dispute the account as "outdated."

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2. Why are there 3 credit bureaus and how do they differ, if at all?

Industry consolidation has whittled what used to be scores of local and regional credit bureaus down to the three that we know of today: Equifax, TransUnion and Experian (Experian is the company formally known as TRW Credit Services). There was a day when you actually had a local credit bureau that would sell your credit file to lenders in your geographic locale. Over the past 2 decades the "big three" gobbled up these smaller credit bureaus in an effort to become truly "national" in their coverage. What this means is that if you lived in Miami all your life and then moved to Anchorage that your credit report would still follow you despite all of your credit having been issued when you lived in south Florida. The benefit of these national credit bureaus is that you won't lose any of your solid credit management history simply because you've moved to another part of the country. Likewise, moving to another part of the country will not rid you of any negative credit reporting challenges that you may have faced in the past. Even if you moved from the US to Canada (or vice versa) your credit history will still follow you.

And, oh yes, they do differ. Equifax, TransUnion and Experian are three separate companies who compete against each other. As such, they do not share their information. It is very unlikely that your credit reports are the same at all three credit bureaus. There are three primary reasons why not:

  • Not all of your lenders report to all three of the credit bureaus - While some lenders do report your credit information to all three credit bureaus, this isn't mandatory. There are almost always going to be omissions in your credit history at one or more of the credit bureaus.
  • Even if all of your lenders DO report to all three credit bureaus the information will probably be different - The lenders that do report to all three credit bureaus do so by sending data tapes to them each month. The problem is that the credit bureaus don't receive them at the same time and don't "run" them at the same time. As such, your account information will generally be different depending on the time of the month.
  • Not all lenders pull a credit report from all three credit bureaus when they are processing your credit applications - When you applied for that credit card or auto loan your lender most likely chose to pull only one of your three credit reports. This means that the "inquiry" is only going to show up on one of your three credit reports. The exception to this rule is a mortgage application. Most mortgage lenders will pull all three of your credit reports during their loan processing practices.

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3. Should I pay off a judgment that is showing up on my credit report? If I do, and it is marked "paid," what will this mean?

At Credit.com we will always advise you to pay off your debts, delinquent or otherwise. If you have a judgment on your credit report then it serves you well to pay it off. Here's why:

  • Lenders with whom you want to do business will look upon a paid judgment more favorably. As a matter of fact, some lenders will require that you pay off delinquent obligations before they will approve your loans. You might as well do it sooner rather than later so you look proactive rather than reactive.
  • Credit scoring models will also view you more favorably if your delinquent obligations are paid in full. Since credit scoring is used in almost all of your credit transactions it's in your best interest to maximize your scores by paying off your past due obligations.

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4. Will all delinquent bills be reported to a credit bureau?

Most of them will eventually make it to your credit reports if you refuse to or cannot make your payments. It goes without saying that most of your traditional credit goes on your credit reports; auto loans, mortgages, credit cards, student loans and retail store cards. The following are some "non traditional" types of credit that don't make it to your credit reports: utilities, cellular phone service and doctor's bills. These credit items generally won't show up on your credit reports unless you stop paying them. Once you stop paying them they'll likely be sold off to third party collection agencies that will most definitely report them on your credit files. It'll take a while, but they'll eventually end up on your files...for seven years from the date of last activity.

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5. What are the top ways to rebuild your credit score quickly?

A low score is a product of poor credit management meaning that your credit history reflects that you are missing or have missed payments and/or you are in too much debt. These two occurrences will make it very hard to earn a high score because they drive about 65% of the "points" in your credit scores.

The only way to rebuild your credit scores is to address why they are low in the first place. Sounds obvious but you'd be surprised how many people take a "shot in the dark" approach at rebuilding their credit scores. Or, they are guided by misinformation and/or unscrupulous individuals that promise a better credit score in exchange for a fee. Formulating a plan to rebuild your credit scores is not difficult. Here's how to do it:

  • Identify where you stand right now - In order to do this you will need to check your credit scores and the credit reports from which they are derived.
  • Review the "reason codes" - Reason codes are the four explanations as to why your scores aren't higher than they are currently. They are delivered along with your scores whenever a lender requests it. For example, one of your reason codes might be "Serious Delinquency" or perhaps "Amount owed on accounts is too high."
  • Be patient - After reviewing your reason codes you may realize that a plan to rebuild your scores may take longer than you'd like. A low score caused by delinquencies will take time to rebuild because delinquencies stay on your credit files for years. However, as these delinquencies age, their impact on your scores will lessen and your scores will increase.
  • Establish new credit - If you've filed bankruptcy or have serious delinquencies, the best way to rebuild your score is to jump right back in and establish new credit. But this time you have to manage your accounts more responsibly. Make your payments on time and don't use up more than 20% of the available credit limits on your credit cards. If you can do this then your scores will increase much faster than simply waiting for your delinquencies to fall off your reports.

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6. Are there any legitimate ways to "repair" your credit and credit scores?

It depends. According to the Fair Credit Reporting Act you have the right to ask that the information on your credit reports be verified as accurate and not outdated. The credit bureaus have 30 days to complete the verification process or they must remove or change the information to coincide with your dispute. The legitimate players will assist the consumer with crafting and submitting dispute letters although the consumer, at no cost, can do this on their own. Compare using one of these "letter" services to hiring a company to change your oil. Sure you can do it yourself for a fraction of the cost...but do you really want to?

From this point forward is where it gets a little fuzzy. Disputing data that you know to be accurate isn't considered a legitimate dispute. And, the credit bureaus are likely to validate it as accurate and leave it on your reports. There are no legitimate methods for "repairing" accurate credit data that you simply don't want on your credit reports.

Beware the company or individual who guarantees that they can remove delinquencies or create a new credit report in your name. These are not legitimate practices and are illegal in most states.

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7. If I have absolutely new credit how soon can I see a credit score developing?

Developing your credit score comes naturally as a result of building your credit history. You've heard the saying "if you build it they will come?" It applies to credit scoring as well. If you build your credit history then your score will come shortly after followed by more creditors that will want your business. The credit scoring models are looking for two things before they will "score" your credit files: age and activity. You have to have at least one account that is greater than 3 to 6 months old and at least one account that has been reported to the credit bureaus within the last 6 to 12 months. The same account can qualify you for a score. So, a credit report with one account open for 9 months that has reported to the credit bureaus within the past 30 days will qualify for a score. Once you've built a score, the challenge is to maximize it, which is a question for another day.

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8. How many times can I pull my own credit reports before it impacts my credit score?

There is good news. Pulling your own credit report is considered a "consumer disclosure" request and therefore your scores will never be impacted. In fact, you can get your credit score and credit report card for free right now!. If, however, you are getting your credit reports from a friend at a mortgage company or at an auto dealership your scores will be impacted. The reason is that their "credit report access" accounts are not setup for consumer disclosure. They are set up as lenders so the "pull" will count against the consumers score.

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9. How much does having my credit checked by a credit grantor impact my score?

This is called a credit inquiry. Anytime a creditor or anyone else accesses your credit report it posts an inquiry. This is a record of who pulled your credit report and on what date. The credit bureaus are required to keep a complete list of all inquiries into your credit report for, in most cases, 24 months.

According to credit scoring research, consumers who are actively shopping for credit are higher credit risks than consumers who are not. This makes common sense. Think about this: would you rather lend money to someone who is applying all over town or to someone who applies only when they need credit? Since there is a correlation between shopping for credit and being a higher credit risk an inquiry will, in some cases, lower your credit score. Don't worry too much though. The credit scoring model has logic built into them that addresses "rate" shopping for auto loans and mortgage lending. The models are smart enough to identify whether you are shopping for the best interest rate by comparing creditors and whether you are out trying to open many accounts in a short period of time. The actual number of points that an inquiry is worth is a closely guarded secret. However, it's safe to say that only those who are "excessively" shopping for credit will be seriously damaging their scores. The moral of this story is to shop and apply for credit only when you need it and, optimally, only after you have gotten your credit and scores in good order.

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