How Long Does Bad Credit Last On Your Report?

Reader Question: How long does bad credit last and what can I do to get rid of it?

As with most credit-related questions, there are many layers to this one. So we should peel the layers one at a time. Let's start with the basics and build from there.

For the benefit of all readers, let me clarify something. When somebody asks how long bad credit lasts (and we get this question a lot), what they usually mean is this: "How long does negative information stay on a credit report?" These reports are used to create your credit score, which lenders will use when considering you for a loan. So both of these things -- your reports and scores -- are important to consumers in general, and home buyers in particular.

Depending on what it is, negative information can stay on your credit report for seven to ten years. There are federal laws that regulate all of this, and if you ever have trouble sleeping at night you can delve into the Fair Credit Reporting Act. It will put you to sleep in short order!

Let me just paraphrase some of the relevant parts of the act. According to section 605, paragraph 'A' of that law:

• A bankruptcy filing must come off after 10 years.
• Civil suits and judgments must come off after 7 years.
• Accounts placed for collection (because of missed payments) must come off after 7 years.
• For all other adverse items on a credit report, the 7-year rule applies.

To sum this all up, a bankruptcy can stay on your credit report for up to 10 years. Most other negative items (such as past-due bills) can stay on there for up to 7 years. Of course, it's possible for these items to last longer than the law allows, which is why it's important to review your reports once a year to make sure items "disappear" when they are supposed to. If not, you will have to send a dispute letter along with any supporting documents to the credit-reporting agency who produced the erroneous report.

When you ask how long bad credit lasts you must also realize that it's all based on your financial behavior. In other words, the information contained in your credit reports is fueled by your day-to-day financial activity. So if you continue to do the things that led to the credit problems in the first place (such as neglecting your bill payments), then your bad credit may last indefinitely.

On the other hand, if you change your financial behavior for the better, the negative information will come off your reports after a few years, and your score will steadily rise at the same time. In fact, you can actually improve your credit rating even while the negative information stays on your reports ... just by being more responsible with your finances.