Why Does Negative Info Linger On Your Credit Report For Up To 7 Years?

Credit-related mistakes can follow you link a stink you can’t wash off. Have an account go into collections, miss payments on your student loans, credit cards, mortgage, car loan, and that info can linger on your credit report for up to seven years, even if it’s just a fluke. This is particularly a problem with medical debt, where even someone with otherwise pristine credit is unable to pay a huge hospital bill. So why is seven years?

That was the question that Credit.com’s Gerri Detweiler looked into, only to find that most people in the consumer credit business have no idea why the Fair Credit Reporting Act [PDF] specifies a maximum of seven years. After all, why not five years or ten years — or why there aren’t a range of dates for different transgressions?

One person from Experian, on of the three major credit bureaus, suggested that the source might even be Biblical, pointing out that Chapter 15 of Deuteronomy mandates forgiveness of debts every seven years.

But she eventually found a Congressional staffer who was able to dig up some info on how the seven-year figure worked its way into the federal legislation.

While lawmakers were negotiating the FCRA, the House and Senate had very different notions about how to specify the amount of time debt could remain on your report. The House wanted a fixed term — three, seven, and 14 years were options proposed — while the Senate proposed the more general “reasonable period of time.”

Consumer advocates argued that the Senate proposal was too ambiguous (Can you imagine the nightmare you’d have trying to convince Experian, Equifax or TransUnion that it’s been a “reasonable perdio of time”?) and suggested seven years, as it was an industry standard at the time.

There have been numerous legislative attempts to change or add nuance to the FCRA in recent years. Some lawmakers have proposed erasing medical debt from credit reports shortly after it’s paid off, while Congresswoman Maxine Waters of California recently introduced a bill that would limit the reporting window to four years for many types of consumer debt.