This question haunts the mind of every person who had to go through a rough credit phase and is now stuck with a blemish on his or her credit report. Negative information or history of your bad credit, affects your credit score adversely. This could mean more expensive insurance premiums, higher interest rates on credit cards, loans and mortgages and in extreme cases even decline of credit line.
Unfortunately, negative information does last for a fairly long period on your credit report. In fact in most cases, it lasts as long as seven years and can continue to affect your future actions. What’s even more troublesome is, if you happen to add another negative information record in your history, the penalty on your score would be much higher than that of the first one. The two negative records together combined are quite likely to affect you adversely in a big way. This in fact should be a big deterrent from committing the same mistake twice.
More specifically, credit and collection accounts remain in the credit history for seven years from the first instance of default. But the good news is that all the positive information can stay indefinitely on your report. For example, when a positive account is shut down, it is typically kept on the credit history for ten years from the day it was closed.
Bankruptcies stay longer on the credit history than other negative information. Chapter 7, 11 and 12 bankruptcies last ten years on the report from the date of its filing, whereas Chapter 13 bankruptcies stay on for seven years from the discharge date, up to a maximum of ten years. The judgments are kept record of for seven years.
The tax liens if unpaid remain on report for an indefinite period and if settled will go off the record after seven years. Inquires can be reported up to two years and they don’t count in credit score for the first twelve months.
There may be some minor differences in the statute of limitations of reporting of negative information from state to state, but broadly the above rules hold. So whether you like it or not, your negative credit information will haunt you for a long time. It is important to manage debt wisely and not get into a tough spot in the first place. But if you do end up defaulting on your credit, make sure to make up for it many times later, in terms of positive credit activity in the future.
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