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Credit Reporting Statute of Limitations for Bad Credit

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Seven Year Rule Exceptions for Bad Credit Reporting

There are exceptions to the seven-year bad credit reporting rule, which most people are completely unaware of. Lenders will notify the bureaus if the consumer’s credit request meets certain criteria, and in such cases the bureaus will report negative items that are more than seven years old.

1. When a consumer attempts to get a loan for $150,000 or more, there’s no time limit.(For those wanting to own a home in the future, this is yet another reason to get those adverse items removed.)
2. When a consumer attempts to obtain a job with a salary of more than $75,000, there is no time limit.
3. When a consumer applies for a life insurance policy worth more than $150,000, there is no time limit.

Note Since there are exceptions to the seven-year credit reporting statute, it makes the removal of any bad credit data all that much more important!

Data retention by the bureaus of obsolete information is permitted for the purposes of providing information under the seven-year rule exemptions. Reporting agencies are not required to retain obsolete information in their databases, but they are permitted to do so.

It’s important to understand how these reporting rules affect your individual report, since your priorities for removal may change as accounts approach their drop-off date. (This is discussed further later on.)

Note The revised FCRA (FACTA, December 2003) has a provision mandating that items placed for collection or charged off must be removed from the credit report after three years, but the following caveats apply: (a) such removal can only be performed one time per consumer, (b) the debt cannot be greater than $100, and (c) the consumer (debtor) must have attended a credit and financial management class during the three-year period. Although this may look attractive at first glance, much more powerful (and less troublesome) methods of bad credit removal can be employed, making this practically useless.

Obsolete Information

Adverse information that has expired due to a credit reporting statute of limitations is considered obsolete. Reporting of obsolete information is prohibited under 15 U.S.C. § 1681c(a). (All 1681 references are from the FCRA.) Further, credit reporting agencies may not indicate that obsolete adverse information exists.13 For example, a reporting agency may not report that a creditor (whose debt is now obsolete) cannot locate the debtor.14 Nothing in the Act prevents a user from using obsolete information should it be wrongfully included in a consumer’s credit report; agencies and furnishers are held accountable for that, through the FCRA. Users bear no liability when they rely on obsolete information for their decision-making.15
 
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