Advice on a 14 Year Old Auto Deficiency on Credit Report

The simple answer to your question is no, a debt incurred 14 years ago should not appear on your credit report.

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7.5 years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7.5 years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent.

Just because a debt is removed from a credit report does not mean the statute of limitations for receiving a judgment to collect the debt has passed. Federal credit report laws and a state statute of limitations laws are separate and independent from each other. The seven years starts running from the date of first delinquency, which generally means seven and a half years from the date of last payment. Review your credit report carefully to make sure that the dates of last payment being reported on these accounts are correct.

The law stating that derogatory items must be removed from credit reports after seven years is designed to help consumers recover from past credit mistakes and help them rebuild their credit rating. If you find charged-off accounts appearing on your credit report after seven years, you may want to dispute the incorrect listings with the credit bureaus.

Some creditors, especially debt purchasing firms, will report inaccurate charge-off dates to extend the amount of time an old account appears on your credit report. If you find any inaccurate information, you should dispute the credit report listing with the bureau in question. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

The seven-year rule only applies to derogatory items, not to accounts that you are keeping current, or which you closed in good standing. As long as an account is not considered derogatory, it can remain on your credit report indefinitely. In fact, even accounts that are no longer reporting to the credit bureaus may continue to appear on your report as long as the account is not a derogatory item. It is common to see positive items that are more than 20 years old appearing on a credit report.

Here, a debt incurred 14 years ago should have already been removed from your credit reports; the fact that the debt is not currently listed on your credit profile indicates that the bureaus removed the item as required. Creditors are not allowed to re-list debts that have exceeded the reporting period allowed by law, so if you have a creditor or collection agency making such a threat, it is probably simply a scare tactic to get you to pay on an expired obligation.

Two issues commonly arise when considering the course of action to take to resolve old debts -- the statute of limitations for the collection of the debt and the length of time the debt can appear on your credit reports. Before you decide how you to deal with this old account, you should first determine exactly how old it actually is.

The statute of limitations for the collection of debts generally runs from the date you last made a payment, while the length of time an account can appear on your credit report depends on the date the account was charged off by the original creditor. In the case of an auto loan deficiency balance, the age of the debt would be calculated based on the date the foreclosed vehicle was sold, or in the case of an accident which totaled a vehicle, the date by which the creditor demanded payment of any portion of the loan not covered by your insurance. Once you have determined the age of the account, you can review the information below to help you determine if you should worry about the account or not.

If a creditor wishes to file a lawsuit against you to collect on a debt, it is required to file suit within a certain time period, referred to as the Statute of Limitations. Basically, the statute of limitations (SOL) is the time period during which a creditor can take legal action (i.e., sue you) to enforce a debt. Each state has defined its own statutes of limitations, and they vary significantly from state to state.

For example, in California, creditors have four years to sue you to enforce a debt, while in Rhode Island they have 10 years. Few states have a statute of limitations longer than six years for enforcement of this type. To learn more about statutes of limitations for the collection of debts, I encourage you to visit the collection laws section of Bills.com. While it is likely that the information available online is accurate, I encourage you to consult with an attorney licensed to practice in your state to discuss the specifics of your situation to help you determine if the SOL for your creditor to sue you has expired.

If you determine that your state’s SOL for the collection of debts has expired, the likelihood of the creditor attempting to sue you to enforce the debt is much less. While the passing of the SOL does not mean that a creditor cannot sue you, if a lawsuit is filed you should have an absolute defense against the lawsuit. If you respond to the suit stating that the SOL has expired, the judge should dismiss the case. Keep in mind that in most states, the SOL begins running from the date you last made a payment on the account. This means that if you paid just a few dollars to a collector a couple of years ago, the SOL for that debt could have been reset.

The passage of the SOL does not forbid a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit. However, if you are receiving collection calls on an expired debt, you can generally stop the calls by sending a cease and desist letter to the collection agency.

Your state’s SOL has little to do with how long accounts can appear on your credit report. As I mentioned, the length of time credit accounts can appear on your credit report is governed by federal law, specifically the Fair Credit Reporting Act. If your state’s SOL is five years, an account can appear on your credit report for two years after your state’s SOL has passed. A new company purchasing your account cannot lengthen the time that the account appears on your credit report. Be careful, though, because many debt purchasers try to change the date of last activity on old accounts so they appear on your credit report for a longer time.

Pull your credit report and carefully review the accounts in question to make sure that no unauthorized changes have been made. If you find any suspicious information on your credit report, you should dispute the listings with the credit bureaus.

To find out more about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com credit resources page.

For further information regarding options available to consumers struggling with debt, I invite you to visit the Bills.com debt help page. I hope the information I have provided will help you Find. Learn. Save.

Best,

Bill

www.bills.com/