Your credit report serves as a record of your financial history for potential lenders and creditors. Debts will remain on your credit record for years after they are paid off to demonstrate your ability to manage money and what level of lending risk you may present to a creditor.
The Facts
A debt can have either a positive or negative effect on your credit rating. Debts that have gone delinquent or demonstrate a history of late payments will negatively impact your score. Debts that have a positive payment history and a low balance, however, will boost your credit rating.
Time Frame
Old collection accounts will only appear on your credit report for seven years and six months. Positive closed accounts can report for seven to 10 years, depending on the credit bureau. Positive debts that are still open, such as credit cards, can appear on your credit report indefinitely.
Inaccuracies
If you discover debts on your credit report that do not belong to you, the Fair Credit Reporting Act (FCRA) gives you the right to dispute those debts with the credit reporting agencies in order to have them removed as soon as possible.
Considerations
Tax debts do not follow the same reporting period as most other derogatory debts. A paid tax debt will be removed from your credit report in seven years. If the debt is left unpaid, however, it can appear within your credit file indefinitely.
Warning
Some collection agencies will intentionally alter the dates an account is scheduled to be removed by the credit bureaus. This results in the account appearing on your credit report for a longer period of time than is allowed by the FCRA. Review your credit reports regularly and report any obsolete debts to the credit bureaus.
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