How Long After Paying Off All Debts on a Credit Report Will It Affect the Report?

It's a common misconception that negative information on a credit report goes away once a debt is paid off. However, the amount of time that information stays on your report is a matter of federal law and, in most cases, has nothing to do with when the debt is paid off.

Credit Report Time Frames

The federal Fair Credit Reporting Act (FCRA) sets time limits on a credit bureau's reporting of negative information. Most negative information, such as late payments, paid judgments or charged-off credit card accounts can stay on your report for seven to seven and a half years. The FRCA allows credit bureaus to report bankruptcies for up to 10 years, though some credit bureaus voluntarily remove a Chapter 13 repayment plan after only seven years.

With the exception of unpaid judgments, which can stay on your report until its statute of limitations runs out, the fact that a debt is paid or unpaid has nothing to do with these time restrictions. Once the time frame prescribed has passed, information about a debt--even a legitimate, unpaid debt--can't be re-added to your credit report.

Credit Report Update

When you pay a debt, your creditor or collection agency should update the information on your credit report to reflect your payment. This usually means reducing your balance to zero and indicating that the account has either been paid in full or that you settled the account for less than the amount due. Unfortunately, this second notation can often hurt your credit, though your zero balance will reduce your overall debt-income ratio.

Common Misconceptions

Some people fear paying off old debts because, in the past, paying off an old debt could "reset the clock" on the length of time that the debt could stay on a credit report. However, the Fair and Accurate Credit Transactions Act of 2003 changed this, so paying an old debt won't extend its presence on your credit record.

Negotiations

When working with a creditor or collection agency, ask if they will remove a negative account from your report in exchange for repayment. Some won't agree to this, but some will, so don't be afraid to make the request. Of course, be sure to get your agreement in writing before sending any money.