Judgments 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 7½ 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 7½ years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to this rule. The seven-year rule does not apply to all debts, however. Here are four exceptions:

• A tax lien can appear for seven years from the date of payment.
• A bankruptcy will appear for 10 years from the date of the final order.
• Federal student loans can be reported for as long as they are delinquent. (Private student loans follow the 7½-year rule.)
• A civil judgment can appear for seven years, or the length of a judgment’s statute of limitations in the consumer’s state, whichever is longer.

Learn the lifespan of a judgment in your state at the Bills.com Statute of Limitations Laws by State page.

The start of the seven-year begins at the date of first delinquency, or if no payments are made, when the first payment was due. Review your credit report carefully to make certain the dates of first delinquency are reported correctly. Unscrupulous collection agents reset the date of first delinquency to stretch out how long a derogatory account appears on consumer's credit report. This is illegal under the FCRA.

Just because a debt does not appear on a credit report does not mean the statute of limitations for the debt has passed. The opposite is also true: The passing of a state statute of limitations on a debt does not mean the debt may not appear on a credit report. The federal FCRA and state statutes of limitations are separate and independent of each other.

Whether a debt appears on a credit report does not establish legal liability for the debt. The opposite is also true: You may have legal liability for a debt not reported to the credit reporting agencies. Credit reports are not legal records of every debt a person owes.

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 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.

A judgment will appear on your credit report for ten years from the date it was entered against you. However, this does not mean that the judgment is only valid for ten years; depending on your state, the judgment may be valid for 10 or 20 years, or longer, and be eligible for renewal after that time period expires. In many states, judgments can be enforced for 60 years or more, as long as the creditor remembers to renew the judgment each time it is set to expire. To learn more about debt collection laws in your state, see the Bills.com resources Collection Laws & Exemptions by State and Judgment Garnishment.

Depending on your state law, a creditor with a judgment against you may be able to place a lien on your property, freeze your bank accounts, and/or garnish your wages. It is important that you research your state's laws to determine what action a creditor can take against you to enforce a judgment. I encourage you to contact any creditor holding a judgment against you to attempt to resolve the account; the creditor may be willing to forbear execution on the judgment if you can start making payments on the judgment. However, if your state is one of the states whose law make the enforcement of judgment difficult, such as Texas, you may decide to simply wait to resolve the judgment at a later date. You need to determine the potential consequences of the judgment against you so you can determine whether it is better for you to try to pay off the judgment or simply let the judgment sit for the time being.

I also encourage you to consult with an attorney in your state to discuss the best course of action for you based on your state's laws and your current financial situation.

I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com