Why Is This Decade-Old Debt Still Hurting My Credit?

Most negative information can stay on your credit reports for no more than seven years, or ten years in the case of certain types of bankruptcy. Then why is an old collection account still appearing on a reader's credit reports more than a decade after he stopped paying? Truth is, some debts can haunt you for years to come:

I stopped paying a credit card debt in the middle or end of 2000. In the fall of 2006 a collection agency bought the debt. I was living in another state and did not realize that a judgment was passed until a year or so later. It is now May 2012, and this is still on my credit report, more than 11 years later. What about the seven years from the date that payment stopped?

This reader is correct in his basic understanding of how long collection accounts can be reported. Specifically, under the Fair Credit Reporting Act, collection accounts must be removed from credit reports seven years and 180 days after the consumer fell behind on payments on the original account that was later turned over to collections. That's true whether the debt has been paid or not.

But in this case, it sounds like our reader is not talking about a collection account that's on his credit report. He's talking about a judgment, which is a different animal with its own reporting period. The collection agency took him to court, and since he didn't respond, obtained a deficiency judgment against him. Here is what the Fair Credit Reporting Act says about how when judgments must be removed from credit reports:

Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.

[Related Article: Collection Agency Out of Business, But Still on Credit Reports]

In plain English that means that a judgment can be reported for up to seven years from the date the judgment was entered by the court. But here is the kicker: if you don't pay it off or settle it, it may be reported until the statute of limitations has expired. In most states, that's ten to twenty years! And since unpaid judgments can often be renewed, theoretically at least, an unpaid judgment can remain on your credit reports indefinitely.

This very long reporting period is one good reason to settle up on a judgment. But there's another good reason to pay it off. In most states, judgment creditors have collection powers than creditors without judgments don't have. That may include the ability to garnish wages or seize property, such as bank accounts.

Like most debts, judgments can often be settled for less than the full balance. Our reader shouldn't hesitate to negotiate if he can't pay the full balance. Of course, if he does strike a deal, he should get it in writing before he pays.

Related links:

What's a Credit Score? Really.

The Best Cash Rewards Credit Card in America

Prepaid Fee Breakdown: Know What You'll Owe

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