by Michelle Black, CreditWriter.com
Most negative items appearing on your credit reports come with an expiration date. If you are a consumer, this is great news since most of your past credit mistakes will not be able to haunt you forever. It gives people the opportunity for a second chance.
There are very specific guidelines regarding credit reporting statutes of limitations which are spelled out in the Fair Credit Reporting Act (FCRA). Per the FCRA most negative items on a credit report have to be removed somewhere between the 7 and the 10 year mark. (CLICK HERE to read “How Long Can Items Remain On My Credit” for a detailed list.)
There are, however, a few items which do not have a credit reporting expiration date under the FCRA. Check out the list below of the types of items which are legally allowed to hang around your credit reports forever.
Unpaid Tax Liens
When you pay off an outstanding tax lien and the lien is released, it is required under the FCRA to be removed from your credit reports after 7 years from the date of release. Better yet, if your lien is withdrawn then it could potentially be removed from your credit reports immediately due to credit bureau policy.
Unpaid tax liens, unfortunately for the tax payer, may legally be able to remain on your credit reports forever. Another frustrating feature of outstanding tax liens is that fact that these liens could potentially make it impossible for you to qualify for a mortgage, regardless of how high your credit scores climb.
The good news regarding federal tax liens is that you do not necessarily need to pay the lien in full before you are eligible to apply for a withdrawal of the lien. You may only need to set up an approved payment plan in order to be eligible for withdrawal under the IRS Fresh Start Program. The 3 major credit reporting agencies – Equifax, TranUnion, and Experian – do not currently include withdrawn tax liens on credit reports as a matter of policy. So, if you are granted a withdrawal then you can request for the lien to be removed from your credit reports.
Outstanding Federal Student Loans
The Fair Credit Reporting Act (FCRA) is actually silent on the subject of federally guaranteed student loans. Instead these government guaranteed loans are governed under the Higher Education Act. As a result, federal student loans which have gone into default do not follow the 7 year deletion rule to which most other defaulted accounts must adhere. In other words, defaulted student loans are legally permitted to remain on your credit reports indefinitely.
You Are Not Out of Options
If unpaid tax liens (especially federal liens) or defaulted student loans are plaguing your credit reports that does not mean that you condemned to spend the rest of your life in credit prison, never able to qualify for a loan again. On the contrary, there are rehabilitation plans (student loans) or payment options which may be available to you to help you get these outstanding issues resolved and enable you to begin rebuilding your credit.
Other Exceptions to the 7-10 Year Rule
If you are applying for a loan higher than $150,000 then, according to the FCRA, any derogatory item on your credit reports which was previously purged off due to the age of the item (i.e. older than 7 or 10 years) could possibly be legally included on your credit reports again. For example, if you had a 20 year old foreclosure it could legally be included on your credit reports when applying for a loan in excess of $150,000.
Credit reports (not scores) are often used for employment screening purposes. If you are applying for a job with an annual salary of $75,000 or higher then credit reporting statutes of limitation under the FCRA are suspended. As a result, previously purged credit report items might legally be allowed to show up on your employment screening credit reports.
The final exception to the 7-10 year credit reporting rule can come into play when you apply for a life insurance policy valued at $150,000 or higher. Should a credit reporting agency choose to provide an insurance provider a more extensive view of your past credit history, including those items which have aged off of your standard credit reports, then they have the legal right to do so.
The Catch
Although in the case of the 3 exceptions above the credit reporting agencies are allowed to include information which would be outdated on a standard credit report, they are probably not going to choose to do so. In fact, it would be unheard of for a previously aged off account to reappear on your credit reports even if one of these specific exceptions applied to your situation.