‘John, I’ve actually been reviewing your articles for a while. You commonly discuss how the credit bureaus cannot show bad things for more than 7 or 10 years.
I’ve the exact same question but from a different angle. Are they needed to show bad things for 7 to 10 years or is that simply the maximum quantity of time they CAN report it?
Taking that one action further, are the credit bureaus needed to report anything at all?’
That’s an intriguing concern since the 7/10 year practice is really the confluence of two things … Federal law and credit bureau policies.
The Fair Credit Reporting Act restricts how long derogatory details can remain on your credit reports. The truth that it really remains that long is a matter of the credit bureaus’ policies.
The world of credit reporting is largely a voluntary one.
There are no laws that need loan providers to show your accounts to the credit bureaus. There are no laws that require a loan provider to report to all three credit bureaus, if they opt to show to any of them.
There are no laws that require loan providers to show to Experian over Equifax or Equifax or TransUnion, and so on. It’s 100 % voluntary.
Further, there are no laws that need the credit bureaus to accept info from any lender. There are no laws that require the credit bureaus to accept anything from a debt collection agency.
And finally, there are no laws that need the credit bureaus to NOT pull public records, like bankruptcies, liens and judgments.
Lenders can not force the credit bureaus to accept their information. Collection agencies can not force the credit bureaus to accept their details.
And, lenders can not force the credit bureaus to sell them credit reports and credit ratings.
No Shoes, No Shirt, No Dice
Remember this line, “No Shoes, No Shirt, No Dice?” That’s how it works in credit reporting … the credit bureaus can select with whom they work.
While the Fair Credit Reporting Act restricts the quantity of time bad info can be preserved by the credit bureaus, it doesn’t force the bureaus to show bad details for the maximum time allowable.
So, a collection can stay on your credit reports for up to 7 years from the date the original account went into default.
But, the credit bureaus could decide to get rid of collections after 5 years or after 3 years.
Why Lenders Most likely Won’t Modification Their Reporting Policies
Having stated that, it’s unlikely the credit bureaus would choose to alter their own reporting policies and get rid of unfavorable information years early like in my example.
Lenders wish to see derogatory information as long as they can since it helps them choose about your applications.
And, even very old derogatory details is still important in your credit ratings as it tells a story about your credit threat.
Simply eliminating bad info years early doesn’t seem to make any sense.
But exactly what if it’s wrong? Can’t that details be eliminated before it’s 7 years of ages?
Of course it can. Incorrect information is removed as quickly as it’s has been confirmed to be inaccurate.
How This Applies to RESPA
By the method, some of you real estate specialists might be considering RESPA and how it attends to the concern of credit reporting when a mortgage loan servicer modifications.
RESPA (Realty Settlement Procedures Act) specifies:
“Throughout the 60-day period beginning on the effective date of transfer of the maintenance of any federally related home mortgage loan, a late charge may not be troubled the customer with regard to any repayment on such loan and no such repayment could be treated as late for other purposes, if the repayment is gotten by the transferor servicer (instead of the transferee servicer who need to properly receive repayment) prior to the due date suitable to such repayment.”
What this implies, in English, is throughout the 60 days after your servicer has actually been changed your repayment can not be thought about late (for credit reporting) if you in fact made the payment on time however mistakenly sent out to the old servicer.
This is often misunderstood as meaning that after 60 days the new home mortgage loan servicer MUST report the account to the credit bureaus.
This is incorrect.
The 60-day guideline just says that credit reporting can not occur if a repayment has been made, not that credit reporting is required.