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September 23, 2009

Pretty good summary of FCRA's seven year reporting rule

Here's a pretty good summary of the seven year reporting rule I found at -  Beware of the information in the last paragraph, which is pretty much completely wrong.  I'll explain after the quote:
A good credit report increases your financial credibility and makes you eligible for loan approvals. But at times there are some mistakes in the credit report which hampers your financial status in a big way.

Sometimes you can become a victim for the misleading information in your credit report. In such cases there is a stipulated time for the reporting period, which is generally seven years. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place. But there are a few exceptions to this rule too.

Any delinquent account placed for collection both internally or by reference to a third-party debt collector, whichever is earlier-charged to profit and loss or subjected to any similar action. The seven-year period is calculated from the date of the delinquency that occurred immediately before the collection activity. For example, assume that your payments on a loan were late in January, but that you caught up in February. You were late again in May, but caught up in July. You were again late in September, but did not catch up before the account was turned over to a collection agency in December. You made no more payments on the account and it is charged to profit and loss in July of the following year.

Under the FCRA, each of the January and May late payments can be reported for seven years. The collection activity and the charge to profit and loss can be reported for seven years from the date of the September payment, which was the delinquency that occurred immediately before those activities.

However there are exceptions to this seven years reporting act. There is no time limit in cases of bankruptcy, criminal conviction, student loan, information on a lawsuit or unpaid judgment and in case of credit information in response to a job application.
As I said above, the information in the last paragraph is pretty much completely wrong.  There is a time limit for bankruptcies.  They can stay on a credit report for 10 years from the date of entry of the order for relief or the date of adjudication.  See 15 U.S.C. 1681c(a)(1). 

The author was correct that criminal convictions have no time limit on their inclusion on a credit report (see 15 U.S.C. 1681c(a)(5)), but civil suits (i.e. lawsuits), civil judgments and records of arrests (i.e. arrests with no conviction) can only stay on your report for the longer of seven years or until the governing statute of limitations expires.  See 15 U.S.C. 1681c(a)(2). 

Student loans are given no special treatment under the FCRA and thus fall under the usual 7 year limitiation on reporting found in 15 U.S.C. 1681c(a)(5).  There may be other laws that I am not aware of that lengthen their reporting period since that's typically money owed to the government and the government tends to have special rules that the rest of us don't get to benefit from. 

Finally, credit reports used in job applications are only exempted from the reporting time limits IF the job being applied for has an annual salary that either exceeds, or is reasonably expected to exceed, $75,000.  See 15 U.S.C. 1681c(b)(3).

Not sure why the author got the first part right but totally flubbed the last paragraph.  I hope I set the record straight.

1 comment:

  1. Granted 15 USC 1681(c)(2) states that civil suite/judgments can stay on report for the longer of seven years or until governing SOL expires. What is the governing SOL expiration dates?