A person's credit score is computed by credit reporting agencies using information that the agencies have collected and place in the individual's credit report. This credit report contains as much information as the agencies can gather about a person's lending history, including the amount and disposition of loans. However, there are time limits for how long information can remain in this report. Most positive information can stay for up to 10 years, while most negative information must be removed after seven.
Negative Information
Negative information on a credit report can be defined as all information on a credit report that a drags down a person's score. Positive information, by contrast, is information that pulls a person's score up. When loans are paid back on time, a person's score goes up. However, when a person is late in making a payment or an overdue debt is sent to a collection agency, this negative information brings a person's score down.
Federal Law
Under the Fair Credit Reporting Act, all credit reporting agencies must remove a negative item within seven years after the item was first listed. However, if the status of this item changes within this time period -- for example, a single additional payment is made on a delinquent debt -- then the credit reporting agency can keep the item seven years from the date of the change. The only exception to this rule is Chapter 7 personal bankruptcies, which can remain on a credit report for up to 10 years.
Agency Policies
Although a credit reporting agency is required to remove a negative item within seven years of the date on which it was listed, some may choose to remove it sooner. Each credit reporting agency uses a different formula to measure an individual's creditworthiness. This information is proprietary and unavailable to the public. Theoretically, a credit reporting agency could decide that a negative item is irrelevant before the seven-year deadline has expired and decide to remove it early.
Disputes
Occasionally, a credit reporting agency will include negative information on a credit report that, according to federal law, should already have been removed. In such a case, the individual must petition the credit reporting agency to have the information removed. If the credit reporting agency fails to remove information that it is legally require to remove, it can face fines, as well as damages from a lawsuit brought by the affected individual.
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