Credit Restoration Myth #2: Credit Bureaus Keep Derrogatories on My Credit Report for 7-10 Years

(Note to consumers:  This is the second in a
series regarding common misconceptions about credit repair or credit
restoration.  The information contained is deemed to be accurate, but
not guaranteed.)

This statement is untrue.  There is absolutely no requirement of law that credit bureaus report ANYTHING ON YOU AT ALL!

Credit bureaus, commonly known as Experian, TransUnion, and CSC/Equifax, are private companies.  They make their income by collecting and selling your personal information.  WHAT! you say?  That’s right.  Let’s delve deeper into this multi-billion dollar business.

First, you purchase something from a creditor (Sears, Arco, Home Depot and more), and you put it on a credit card.  It could be the credit card offered by the creditor, or it could be a general credit card you got from Visa or MasterCard through a lender like CitiBank, Chase, etc.  The company is saying that they will trust you to take the item you are purchasing home with you without paying for it today.  You have just applied for and received “credit”.  The credit card comes with a set of rules that must be adhered to:  for instance, if you pay off the balance in full before the next billing cycle date, there will be no interest charged.  If you do not pay the balance in full, whatever balance exists at the time of the billing cycle change, an interest rate will be applied to that balance.  And so it goes, month after month until paid off.

In addition, if you miss a payment, or go over the credit limit they have granted you, there will be additional charges.

The creditor (Sears, Arco, Home Depot) may choose to report your credit activity and history to one or more bureaus.  That’s right…not every creditor reports to all three bureaus.  Wonder why?  It costs them money to do so.  Each bureau charges the creditor to receive your information on a monthly, quarterly, or annual basis.  And you usually do not know what the creditor’s standard practice for reporting is until it bites you.

Whether or not the information they convey to the bureaus is accurate, it is all done electronically.  So a typographical error can occur in the transmission of data, or at the receiving end of the transmission.  This makes the number of mistakes grow.  Add to that the fact that in some cases, the data they are conveying to the bureau is inaccurate (as in the example of a debt that has been paid off, but not yet shown in the data), and you can easily see why so many mistakes occur.

The bureaus do have rules they have to follow.  But at present, there is no “effective” body that has oversight over their methods.  Enforcement is a problem.  But one thing is clear.  If you have had a bankruptcy, the bureaus are required to report that data for 7-10 years:  7 years in the case of a Chapter 13 bankruptcy, and 10 years in the case of a Chapter 7 bankruptcy.  They are required to report liens for up to 15 years.  Usually, when you have a derogatory item on your report, such as a late payment or other less serious infringement, it can stay on your report for up to 7 years…however, creditors who are reviewing the report usually do not look beyond the last two years on your history.  So the timing is critical to you applying for new credit or for a credit increase.

If there is something we can do to help you clean up your credit history, call us today!