One of the first credit repair steps involves removing information that is outdated. The problem is that many consumers cannot tell when information is outdated. On the surface, it seems like a simple exercise – just compare some dates. While that is correct, the more difficult part involves determining which dates to compare. The answers are provided in The Fair Credit Reporting Act, section 605. According to section 605, the following items may not be reported on your credit reports:
- Bankruptcy: Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
- Civil suits, civil judgments, and records of arrest: Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
- Paid tax liens: Paid tax liens which, from date of payment, antedate the report by more than seven years.
- Collections and Chare Offs: Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.
- Other Adverse Items: Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.
So What Are The Exceptions?
There are exceptions to these general rules. Most of the exceptions are based upon the use of the report. The general rules are not applicable in the case of any consumer credit report to be used in connection with the following:
- Credit transactions involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
- Underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
- Employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.
If you have ever wondered why there are so many different credit scoring models, this is one of the primary reasons. The information that is permitted to be included on the credit report can vary depending on what the credit report is being used for.
So When Does The Time Period Start?
In regards to bankruptcy, the 10 year period starts at the date of entry of the order for relief or the date of adjudication. In regards to the other items, the 7 year period begins, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action. Clear as mud, right?
So What Does This Mean?
In order to understand if items on your credit report are outdated, you need to understand how the dates are calculated. Remember, you should review your credit reports frequently for errors and signs of identity theft. It is not uncommon that dates are incorrect. In fact, in the case of debt collection, errors in the proper dates are very common. These errors may result in negative items being reported longer than necessary. Check the dates on your reports and verify that the information is correct. If you need help, give us a call – we would be happy to assist you.