Your credit report or “credit history” covers the last 10 years of your financial life. Credit reports often only take on importance to you when you are seeking to borrow a large sum of money such as a mortgage loan to purchase a home or an automobile loan. If you applied for and received a department store credit card back in 1991, even if you never used it, it will still appear on your credit report. It will continue to appear on the reports for 10 years. Most stores, banks, lenders, and credit card companies automatically report to the major credit bureaus on a monthly basis. This is so despite the fact that you did not use the account during that time period. Potential lenders desire to see your credit use and spending patterns for a substantial time period to help them determine your “creditworthiness”.

Frequently during the loan application and approval process a potential borrower is advised that there is a debt or “blemish” on his or her credit report and the lender wants it paid or otherwise removed from the credit history before they will approve a new loan. Credit bureaus only report negative information about your credit for a period of 7 years. Even extremely derogatory reports such as foreclosures, bankruptcies, or judgment liens will be eliminated once they become more than 7 year old.

One exception to the “7 year rule” is the United States Internal Revenue Service. The IRS will often report its tax lien again to the credit bureaus to create a fictional new “new activity” on the account to resurrect the negative report for another 7 years. Some credit bureaus will use a similar device to recreate an old debt but they usually do not employ the practice unless there is a substantial amount of money owed.

If there is a dispute between you and a creditor claimed that you owe a debt it is the creditor’s burden to prove the existence of the debt. It is not up to you to prove that the debt does not exist. If the creditor cannot prove a debt exists by means of an unpaid invoice or similar proof the credit bureau is obliged to remove the item.

Often a debt is “sold” to another party who then attempts to collect it. This can be the source of some confusion to a debtor because the name that shows up on the credit report may be unfamiliar to the debtor. For example, Home Depot may sell its debt to HFC resulting in a debt owed to HFC showing on your credit report when you had no direct dealings with HFC. You still have to deal with HFC if the underlying debt is valid and proven.

See also…

Business and Finance Law