How Do Credit Report Removals Work?

[SpunkyMonkey]

I probably already phrased this question wrong. : P

My friend and I were talking about the ensuing mortgage crisis (which is affecting our local area hard) and about subsequent credit issues folks involved would face. Then we got confused about credit issues and now are at loggerheads. When do credit ratins get removed? At the end of 7 years past loan start date, or 7 years past failure to pay?

I’m sure I’m being confusing. Let me illustrate using Joe, one unfortunate dude.

Joe decided to buy a car. Yay Joe! On 1/1/2001 Joe bought a car using the classic down payment / loan configuration. His loan was for 4 years. In otherwords, Joe would have paid up totally on 1/1/2005.

After 2 years of making payments, Joe was attacked by a cougar at the local zoo on 1/1/ 2003. Poor Joe! Now missing several limbs, Joe could no longer work. After a few months of not being able to pay his car note, the car folks came and repo’d Joe’s car on 4/1/2003. Joe was sad.

Obviously, this bit of nastiness would be on Joe’s credit report, yes? Would it come off 1/1/2008 (7 years after the loan was placed), or would it come off 4/1/2010 (7 years after repo)?

If you are wondering, I am female, I have never been attacked by a cougar, my limbs are intact, and my car is the garage. I’m just curious. And ignorant. Oh so ignorant.

[Lobsang]

@SpunkyMonkey

I probably already phrased this question wrong. : P

And posted it three times.

[SpunkyMonkey]

@Lobsang

And posted it three times.

I know. It was on accident. I cannot seem to close them though.

[Antinor01]

The 7 year timer starts with the last activity on the account. In your above situation, the 7 years would start at or around the time of the repo, hence on the credit report until 2010.

[samclem]

@SpunkyMonkey

I know. It was on accident. I cannot seem to close them though.

Hit “submit reply” only once. Even if the board seems to you to hang up, it probably went through. Trust me.

samclem GQ moderator

[Philster]

@Antinor01

The 7 year timer starts with the last activity on the account. In your above situation, the 7 years would start at or around the time of the repo, hence on the credit report until 2010.

Nope. Sort of…but a bit misleading.

It’s seven years from the first delinquency in the string of deliquencies that led to a charge-off or collection.

No derog can be on file past 7 years, regardless of ‘last activity’. Last activity means squat. If you pay and/or create ‘new activity’, any derog on file is gonna fall off at seven years.

examples:

If an account starts to go sour in Jan 2001, but doesn’t get charged off or sent to collections until January 2002, the original date of deliquency is Jan, 2001 and by Jan, 2008 it will be purged. If you make payments in June, 2002, it doesn’t matter – the original date is Jan, 2001.

If you make a late payment, but the rest of the acc’t is good, the late payment (over 30 days or more as less aren’t reported) will fall off at the seven year mark.

[DrDeth]

@Philster

Nope. Sort of…but a bit misleading.

It’s seven years from the first delinquency in the string of deliquencies that led to a charge-off or collection.

No derog can be on file past 7 years, regardless of ‘last activity’. Last activity means squat. If you pay and/or create ‘new activity’, any derog on file is gonna fall off at seven years.

.

**
Philster** is an expert here. But I think phrasing it like this is better: "No derogs should be on file past 7 years, regardless of ‘last activity’, although far too often they are. t. If you pay and/or create ‘new activity’, any derog on file is supposed to fall off at seven years.

Mistakes happen, and this is a common one. And unscrupulous Collection agencies try this also, on purpose. :mad: Generally, if you dispute something over 7 years, it will be taken off. (Bankruptcies are an exception, they last 10 years).

[Mr.Slant]

Unless, of course, you dispute the bankruptcy, in which case the nitwits at at least one credit reporting agency may occasionally just choose to remove it at the 2-year point.
What?
I’m just sayin’…

[SpunkyMonkey]

@Philster

Nope. Sort of…but a bit misleading.

It’s seven years from the first delinquency in the string of deliquencies that led to a charge-off or collection.

examples:

If an account starts to go sour in Jan 2001, but doesn’t get charged off or sent to collections until January 2002, the original date of deliquency is Jan, 2001 and by Jan, 2008 it will be purged. If you make payments in June, 2002, it doesn’t matter – the original date is Jan, 2001.

If you make a late payment, but the rest of the acc’t is good, the late payment (over 30 days or more as less aren’t reported) will fall off at the seven year mark.

So for poor cougar-bitten Joe, if he stopped paying on 1/1/2003, he would have this on his credit until 1/1/2010?

[Mr.Slant]

Almost.
But you’re looking at a month or more delay from 1/1/03 until the creditor notices the account is late, plus maybe another week or two depending on the statement cycle.

[Mr.Slant]

And, come to think of it, most folks that report to credit bureaus don’t update every day, so it’s possible for there to be a delay in the creditor database actually making it to the credit reporting agency, so you’re looking at another 15 days to 90 days.

[Gfactor]

Here is what the Fair Credit Reporting Act says (setting to one side for the moment the fair comment that it doesn’t always get followed):

(a) Information excluded from consumer reports
Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:
(1) Cases under title 11 or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
(2) 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.
(3) Paid tax liens which, from date of payment, antedate the report by more than seven years.
(4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.
(5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.
(6) The name, address, and telephone number of any medical information furnisher that has notified the agency of its status, unless—
(A) such name, address, and telephone number are restricted or reported using codes that do not identify, or provide information sufficient to infer, the specific provider or the nature of such services, products, or devices to a person other than the consumer; or
(B) the report is being provided to an insurance company for a purpose relating to engaging in the business of insurance other than property and casualty insurance.
(b) Exempted cases
The provisions of paragraphs (1) through (5) of subsection (a) of this section are not applicable in the case of any consumer credit report to be used in connection with—
(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
(2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
(3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.
(c) Running of reporting period
(1) In general
The 7-year period referred to in paragraphs (4) and (6) of subsection (a) of this section shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
(2) Effective date
Paragraph (1) shall apply only to items of information added to the file of a consumer on or after the date that is 455 days after September 30, 1996.(d)

15 U.S. Code § 1681c - Requirements relating to information contained in...

So it’s seven years from 180 days *after * the delinquency.

[Philster]

No, what the that is saying is the opposite: it might take 180 to get written off or be sent to collection, but that 180 days does not extend the 7-year period.

It used to be, prior to recent ammendments, the way Gfactor explains.

If an account goes to collection after 180 days, the original date of delinquency is the starting point for the seven years. So, it might take 6 months to be charged off or sent to collections, but the original date of delinquency is the starting point. More importantly, my explanation is how the credit reporting agencies interpret it.

[Gfactor]

@Philster

It used to be, prior to recent ammendments,

Which recent amendments are those? I pulled the same paragraph:

(c) Running of reporting period.
(1) In general. The 7-year period referred to in paragraphs (4) and (6) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.

from Lexis, which says “*** CURRENT THROUGH P.L. 110-138, APPROVED 12/14/2007 ***”

Here is staff interpretation of the section from 2000:

Ms. Alaina K. Amason
14155 Shire Oak
San Antonio, TX 78247

Dear Ms. Amason:

This responds to your letter concerning the time limitations imposed by the Fair Credit Reporting Act (“FCRA”) on the reporting of chargeoff accounts by a consumer reporting agency (“CRA,” usually a credit bureau). We list your inquiries on this topic below in italics, with our replies immediately following each item.

1. What reporting limits does the FCRA provide with respect to chargeoffs, and how long have they been in effect?

   Section 605(a)(4), which has been in effect since the FCRA became effective in April 1971, has always prohibited CRAs from reporting chargeoffs that are more than seven years old.(1) Section 623(a)(5), which became law in September 1997, requires a creditor that reports a chargeoff to a CRA to notify the agency (within 90 days of reporting the account) of “the month and year of the commencement of the delinquency that immediately preceded” the chargeoff. Section 605(c)(1) provides that the seven year period begins 180 days from that date. Both provisions were part of the major revision to the FCRA that were enacted in 1996.(2)

2. Is the reporting period extended if (A) the original creditor sells or transfers the account to another creditor, (B) the consumer responds to post-chargeoff collection efforts by making a payment on the debt, or (C) the consumer disputes the account with a CRA?

   Does it matter whether the 7-year period has expired when any of these events occurs? No. In enacting the new provisions discussed above, Congress intended to establish a date certain – 180 days after the start of the delinquency that led to the chargeoff – to begin the obsolescence period. It did so to correct the often lengthy extension of the period that resulted from later events under the original FCRA. Enclosed are two staff opinion letters (Kosmerl, 06/04/99; Johnson, 08/31/98) that discuss the impact of these provisions, and the legislative history relating to their enactment, in more detail. Because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed – sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer – changes the allowable period for a CRA to report a chargeoff.

3. Since Sections 623(a)(5) and 605(c)(1) provide new rules for calculating the 7-year period that became effective in 1997, do chargeoff accounts now have different obsolescence periods depending on when the chargeoff occurred?

   Yes. Section 605(c)(2) states that the section “shall apply only to items of information added to the (CRA) file of a consumer on or after” 455 days after enactment, or December 29, 1997. Therefore, a chargeoff reported to a CRA on or after that date is subject to the new commencement-of-the-delinquency method of calculating the obsolescence period set forth in Sections 623(a)(5) and 605(c)(1). On the other hand, a chargeoff reported to a CRA before December 29, 1997, is not covered by the new provisions, as discussed in one of the enclosed letters (Kosmerl, 06/04/99). If a credit account was reported as a chargeoff before that date, the Commission’s view has been that it can be reported for seven years from the date the creditor actually charged it off.(3)

The opinions set forth in this informal staff letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

1. Section 605(b) provides that there is no time limit applicable to a report made in connection with credit involving a principal amount (or insurance with a face amount) of $150,000 or more, or employment for a salary of $75,000 or more. Prior to September 1997, those amounts were $50,000 and $20,000, respectively.

2. The Consumer Credit Reporting Reform Act of 1996 (Title II, Subchapter D, of Public Law 104-280, signed into law on September 30, 1996), made many other changes to the FCRA.

3. Commentary on the Fair Credit Reporting Act, 16 CFR Part 600 Appendix, comment 605(a)(4)-2. 55 Fed. Reg. 18804, 18818 (May 4, 1990).

Advisory Opinion to Amason (02-15-00)

And see, Barron & Berenson, Federal Regulation of Real Estate and Mortgage Lending, Ch. 9 (Fair Credit Reporting Act) (2004):

The 1996 Amendments expressly set the point when the seven years runs. The calculation is a three step process. The first step is the determinatio that one of the triggering events: the placing of the account for collection, charging the account to profit and loss, or subjecting the account to a similar action occurred. The next step is to determine the date of the commencement of the delinquency that immediately preceded the triggering event. . . . The third step is to count forward 180 days from the date of the delinquency. That is the date the seve-year period begins to run.

FACTA did not modify this rule, which has been in place for 11 years.

[Philster]

Read my last line.

[Gfactor]

@Philster

It used to be, prior to recent ammendments, the way Gfactor explains.

I responded to this by pointing out that there were no recent amendments that talk about this issue. Your response is that credit reporting agencies somehow think there are. I’m not sure I follow your logic. Can you explain to me why credit reporting agencies would reach this conclusion? Perhaps a citation is in order.