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Charge-Off, Credit Report & Statute of Limitations

Mark Cappel
UpdatedDec 18, 2009
Key Takeaways:
  • A derogatory entry on a credit report can appear for 7 1/2 years.
  • The rules for credit reports have no relationship to a state's statute of limitations.
  • A debt older than the statute of limitations can still be collected privately.

How long will a charge-off appear on my credit report?

If I have a charge off on my credit report, will that affect my credit rating? How long will it stay on my credit report if I don't pay it off or file bankruptcy?

Before I explore the issues raised in your question, we need to establish a few definitions and concepts.

Charge Off

"Charge-off" is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of your last payment. The fact that an account is charged-off does not mean the debt may not be collected later, or is canceled or forgiven. The charge-off date also does not correspond to the statute of limitations on collecting a debt, or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings.

Because an account is charged off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency. See the resource Charge Off for a more complete discussion of this oft-misunderstood phrase.

At some point, and it varies by your state of residence, a debt becomes so old that your state's laws may provide relief. This is where your state’s statute of limitations comes in.

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Statute of Limitations

All states have a body of statutes in their codes of law called, "Limitations of Actions," commonly referred to as the statutes of limitations. The idea behind these laws is that we as a society have decided that we don’t want old debts hanging around forever — we want people and businesses to be able to move on with their lives without worrying about being sued.

The length of time a creditor has to sue you depends on your state of residence and the type of debt. For example, many states allow longer for creditors to file suit to collect on closed-ended consumer loans than on credit card debts. Most states give credit card issuers three to four years to file suit after default, but some states allow as many as 10 years. See the resource Statute of Limitations to learn more about this sometimes tricky part of civil law.

To see your state's statute of limitations, read the Collection Laws and Statute of Limitations page. If a creditor files a lawsuit after the allowed time, the court will usually throw the case out and not allow the creditor to file suit again (called dismissed with prejudice).

However, you must raise the issue of expired statute of limitations in a written response to the lawsuit, or else the court will not know that the statute of limitations has expired. Although the periods vary from state to state, I believe that there is only one (Ohio) that is longer than 10 years.

Remember: The passing of the SOL does not mean that a creditor cannot sue you. It means if a lawsuit is filed you should have an absolute defense against the lawsuit if you raise the defense. Also, keep in mind that the passage of the SOL does not prevent a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit.

Credit Report Rules

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called 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 up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency. The date of first delinquency is shown in credit reports. Subsequent activity, such as resolving the debt or one debt collector selling the debt to another collector, is irrelevant to the 7-year rule.

Some debts have a reporting period longer than 7 years, including:

  • Tax liens: 10 years if unpaid, or 7 years from the payment date
  • Bankruptcy: 10 years from the date of filing (15 U.S.C. §1681c)
  • Perkins student loans: Until paid in full (20 U.S.C. §1087cc(c)(3))
  • Direct and FFEL loans: 7 years from default or rehabilitation date (20 U.S.C. §1080a(f)(1) and 20 U.S.C. §1087e(a)(1))
  • Judgments: 7 years or the debtor’s state statute of limitations on judgments, whichever is longer

The FCRA 7-year rule is separate from state statutes of limitations for debt issues.

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

The start of the 7-year period 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.

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 7-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.

Resolving the Debt

As discussed above, the fact that the debt is charged-off does not mean the debt is forgiven or canceled. Your credit report should not be your primary concern. To learn more about your rights and liabilities in the collections process, see Collections Advice. I also recommend you read What Are My Debt Resolution Options?

I hope this information helps you Find. Learn & Save.




AApril, Nov, 2022
Hello I have a car loan that was charge off for late fees that I never realized I even owed. The principal balance is zero everything owed is strictly fees. What are my options and how long can they keep this reported as a charge off. They refuse to delete if I pay. This is completely frustrating because I made payments for five years and was even given my title. I know that it is usually 7 years from first missed payments but this is all late fees
TTed, Nov, 2022
Hello April. Are you seeking to pursue a financial service? What is your credit score? You might be able to still achieve your goals after this fact. Regards, Josh
TTim, May, 2014
I paid an delinquent debt of $1,000 on February 29th of 2012 to a third-party collection agency. My bank had been dinging me for years for the debt, but once I made the payment to the collection agency, my credit grantor shifted the status of the account to "Paid/Charge-Off". The outstanding debt with this creditor was the amount of $881, so the amount I paid was above and beyond what I owed. What course of action can be done to remove this charge off on my account? Do I contact my creditor and politely request the derogatory account be removed? I have impeccable credit except for this debt, so this is my only remaining blemish. It was with a credit union.
BBill, Jun, 2014
A consumer can ask a creditor to remove an old derogatory from a credit report, but the creditor will more often than not say "no." See the article pay for delete article to learn more about this subject.
JJane, May, 2014
I have a charge off on a home equity loan that was paid in full according to our agreement. How do I get this off my credit report?
BBill, May, 2014
Even when an account is paid-off, negative history tied to it still will remain on the credit report for 7 years after the date of first delinquency. If it is still being reported after that time, you should file a dispute with whichever credit bureau still reports it.
RRaj, Apr, 2014
I did a short sale in 2009. I had two loans. I got short sale approval from both the lender. 2nd lender gave the short sale approval but also had me signed a debt agreement to pay back rest of amounts. After closing I continued to make the payment to the 2nd lender. After 6 months I left country and became delinquent. It's been 4 years and the lender is still reporting it every month with REAL ESTATE - JR LIENS/NON-PURCHASE MONEY. The account status shows "Potentially negative closed" and payment status shows "charge-off" in experian, "bad debt & placed for collection & skip" in equifax. The lender has not made any attempt to collect the debt. Even though it's being reported every month with accrued interest, question is is it going to come off after 71/2 years provided lender does not do anything on it. What are my options and what should I do? Please let me know. Thanks for your help
BBill, May, 2014
The second mortgage information will fall off of your credit report 7 years after the date of first delinquency, which I surmise occurred sometime in 2010. If so, then this will stop appearing on your credit reports sometime in 2017.