Why Does Negative Info Stay on Credit Report for 7 Years?

Something I've wondered about from time to time...Why seven years to get rid of negative credit info? Well, here's an article that gives an answer. Apparently, the answer is: it was a compromise between the House and the Senate back in the 1960's. This may not work in today's world as some other countries like Germany it's only 4 years; 3 years in Sweden.

When Congress originally considered the Fair Credit Reporting Act in the 1960s, it appears as though the permissible time periods for removing adverse information originated as a compromise between the differing House and Senate positions. The House considered limiting the time period to three, seven or 14 years. The Senate, however, proposed a more general standard of a “reasonable period of time.”

According to the Congressional Reporting Service, some consumer advocates argued that the “reasonable” standard was too ambiguous and pointed out that the seven year time period was already being commonly used by industry at the time.

A White House staffer has this to say:

Not surprisingly, Magnuson cautions against shortening the reporting period. “The seven years as a predictive timeframe has withstood the test of time when it comes to balancing fairness against safety and soundness concerns.

So, while it's not a totally clear answer; at least not to me, we do get some insight as to why we are still held prisoner to the 7 year rule. It works so there's no need to change it...What says ATS?

finance.yahoo.com...

a reply to: lostbook

I do believ e that these credit reports - for which we are supposed to pay for if we want to see a report that someone has actually spied on us to create are merely a thing of expensive bribery.

The days when we had B&D for Bad and debtor customers was fair and all outlets giving or accedpting credit needed but today these credit reports are a threat to people's choices. Were you to want to demonstrate about something you thought important and missed a day from work this would all go against you. Were you accused of a crime yet completely innocent you could loose your job and thered's the credit report to think about.

Its too much information and I don't like the way we have been put into this trap blindly and without choice. I don't want you to do a credit report on me - doesn't exist they will anyway which I think is a breach of ones privacy.

Why things stay on these reports once they have been addressed is wrong and means people can access this information and in the wrong hands even blackmail someone.

I believe that for most crimes, once one has paid for them them, they should be taken off ones record - you did the crime and paid for it so you should be free of it (unless its something that makes you a threat to the public) and its the same if your finances get out of hand for sometime, once they are back in order - that should be it, you dealt with it and went through the hardship to get it right so why should you have it on your financial record? We also have the tale of Wonga etc where unscrupulous lenders are not regulated to jut how much interest they charge - we need a usary law of some sort put in place to protect the poor as this is merely another way to relieve people of their possessions by the rich.

a reply to: lostbook

Personally, I do not play the credit game. I do not borrow money, I do not own credit cards, I am strictly cash and carry, so to speak. Have been for years and years... I refuse to pay someone rates so I can have something a bit quicker. Exercise some restraint and save up for those big purchases. Buying a home is probably the single exception to the above rules. I am 60, and no longer want the responsibilities that accompany ownership.
I use a debit card and have alerts turned on so I get a text message every time the card is used, that way I know immediately should an unapproved charge show up.

If you choose to play the credit game, then you must follow the rules. I am in a business which uses credit and background checks prior to approval of services. Disagree as you like, in most cases one's history is a decent predictor of future behavior. Not to mention, if you were in the business of loaning money, for example, would you allow your customers or potential customers to set the rules under which you operated in making responsible choices to protect your own assets?

How does one discriminate between the habitual offenders and those who had a tough period? Pretty simple, once the period has passed the negative reports cease to come in.

If someone can suggest a method by which those who grant credit, or provide services that can be taken advantage of by the unscrupulous then I am all ears....unfortunately, I do not know of any. As with any system, any set of rules, there are always those who are going to be the exception and credit systems are no different.

Many of the claims of identity theft are not, in fact, identity theft but rather someone trying to get something for nothing by claiming their identity was stolen. This, unfortunately, makes it very hard on those whose identity has been genuinely stolen.

Not everyone is above board, honest, and have a sense of ethics and morality. Those are the ones who screw things up for the rest of us.

You mean the slave rating? Because if they're going to sign you up for indentured servitude, they want to make sure you're willing to die for then when they say so. That's why.

The entire "credit rating" system is designed to let the slave holders know if you are a good investment. (See my signature line.)

Due to the recent housing price bubble disaster many families ended up with short sales or foreclosures on their credit reports.
Until recently banks were not approving new home loans for people who had a prior foreclosure.
The mortgage rep at Wells Fargo told me he is now seeing people approved with scores near 650 again, but they usually pay half a percentage point higher interest.

If the US adopted the 3 year Swedish standard the banks would not be able to tier their rates as effectively thats all.

As far as the time goes for negative reports (most places its only 7 for bankruptcy, 3-4? for lat payments), I think it is a fair amount. I have friends that have gone through bankruptcy 4 times and bought all kinds of stuff each time, so it obviously should be there as a warning.

What I don't like is how the score is calculated and maintained. The score is not based on credit-worthyness, but rather how likely you are to use it first, then partially on how likely you are to pay it back. I once had a bank say that I didn't have "enough" high dollar debt (car payments). I said you can look and see I just paid my car off in 6 months. That put me in a "risk" category that might pay the debt off early and they wouldn't get their interest, doh.

Additionally, the process to remove erroneous damage from ID theft etc. can be ridiculous and there is little oversight against fraudulent debt collectors among other things.

IMO bad system, but the duration of record is not the problem. If the information was used correctly, it would serve as a good warning and 7 years seems like a reasonable time while 3 seems a bit too easy to not have learned any lesson.

You can always get collateralized credit cards and whatnot to build it back up much faster. If you can't afford to back your credit card with a lump of cash, you have no business with a credit card.

a reply to: lostbook

Greetings- Back in 1999 I was working undercover Narcotics and had a "cold phone" a dedicated telephone line that couldn't be traced back to the Police dep't. I was working on some search warrants and received a phone call from a "Customer Service agent" from Dillards™ At the time I had no idea what Dillards™ was (dep't. store) but the Lady explained that they'd been looking for me for quite some time and that I owed $3500 for a credit card.
I immediately called our in-house Fraud Detective. While I was talking to Him, the Dillards™ Lady had called My Wife and told Her that I was having an affair and My Lover's Father was quite upset with My actions and that I owed $3500.

It turned out that a person w/My same name, different middle initial, had walked into a jewelry store in Georgia and opened a credit account and He didn't know his social security number. So numb nuts provided just "our name" and because of My 800+ credit guess what? Luckily on a few He added an initial when signing for things..

The final tally was $18k and this was after sending the Dillards™ Lady a copy of My driver's License; Police Identification and My retired Fed. LEO I.D..

I still get calls when the collection agencies sell the debt. It is quite a PITA. I have to explain the whole story knowing the one listening isn't writing down the latest info, if they were, I wouldn't be still receiving calls 15 years later..

Friendly Tip: I'd suggest any/ALL to get a "FRAUD ALERT" on their credit history and this should include any/ALL names used. This is a FREE service and can be done either on-line or via the telephone. With ALL the phishing/scams if You're going to use any "plastic" You have to cover Your a$$. Of course, the companies raise the prices and "they" sell it due to "security concerns" which is horse manure.


And if You do call the cops to report it, make sure they DOCUMENT IT.

Luckily, I still had some "wood" at the Federal level and My credit was back to just My charges after a few phone calls but could be an absolute NIGHTMARE for a "private citizen"

a reply to: Halfswede

Any way you go a person can be punished..and have lower score (banks usually don't LOOK at the credit report..only the 'score') I'm done with credit too. I have NOTHING financed at this point and don't plan on anything in the future. We used to have decent credit. Purchased a home, car, had a few credit cards..We started to pay down the debt slowly and over time we were paid in full. I left a bigger debt (1200bucks) for tax time..when we got our tax check I paid it off in full. Two weeks later I got a letter saying the account was being closed due to lowered credit score. I was FURIOUS..I started researching this online and found that when you PAY debt (which I thought they wanted) you get lowered just as much as if you didn't pay it at all. If I would have known before I paid this I would have sent them a big F-U and never paid the lousy thing!

Because they cannot take a pound of flesh from you, so instead, they will try and keep you from ever buying anything again. They will punish you and hold a grudge. The banking crowd control the credit system too.

Two years ago I was screaming. Loud and long at all three credit agencies because they don't even follow their own rules.

They need to go. We didn't ask them to go into business, I don't want to buy their product. Just go.