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Is My Credit Score a Permanent Record?

The longer you take to repay a missed payment, the more of an impact it’ll have on your credit score. Missed and late payments will stay on your credit report for seven years.  

July 20, 2021

If managing your finances is like school, your credit report serves the role of report card – giving you an overall grade, or credit score, reflecting how you manage your finances. 

Like school, studying and late-night cram sessions can improve your grades moving forward, but some of those low grades or derogatory marks on your credit report will stick around long after you start making improvements to your finances. 

Just how long do financial records remain on your credit report? We’ll explain that below, as well as how to remove derogatory items from the credit report.

What Are Derogatory Marks? 

When you miss a payment or default on a loan, a derogatory mark will appear on your credit report and will negatively impact your credit score. As a result, you might have difficulty being able to qualify for future loans or credit cards. 

Just how much a mark impacts your credit score varies. But these marks aren’t simply erased when you pay off a loan or start saving more cash. Instead, marks will linger for years after you make them. Different records stay on your report for different periods. 

How Long Do Financial Records Remain on Your Credit Report? 

How long do derogatory marks stay on credit reports? It varies. Some derogatory marks will linger for up to a decade on credit reports, while others will fade in a matter of years. Here are the most common marks you’ll encounter, how long they last and how to remove derogatory items from a credit report.

Missed or late payments

If a loan or credit card payment is late by at least 30 days, it’s considered a missed payment. The longer you take to repay a missed payment, the more of an impact it’ll have on your credit score. Missed and late payments will stay on your credit report for seven years.  

What you can do about it

If you can, make the missed payment as soon as possible. Making the payment within 30 days of its due date typically means the late payment won’t be reported to the credit bureaus and it won’t show up on your report.

Make it a priority to pay at least the minimum amount due on time, even setting up an automatic payment to ensure you’ll never miss a due date. If it’s the first time you’ve missed a payment, reach out to your lender to see if they will remove the late fee or even take the derogatory mark off of your account if you pay the bill immediately. 

While the derogatory mark from a missed or late payment stays on your record for seven years, its impact on your credit score will fade over time. If you continue to make on-time payments, the mark will have less impact on your score. 

Loan in collections

When you stop making payments on a loan or miss several payments, chances are your lender will send the account to collections. When it’s sent to collections, you may begin receiving calls from a collections agency asking you to set up a repayment plan. 

Having a loan sent to collections can negatively impact your credit score. This derogatory mark will stay on your credit report for seven years

What you can do about it

Laws surrounding collections vary state by state, and you could reach out to your state attorney general’s office to learn more about your specific rights. Then, with more understanding on the subject, it’s time to work with the collections agency to settle the debt. 

Tally

If you repay the loan before the end of the seven years, some credit reporting bureaus will remove the derogatory mark from your credit history. For example, Equifax will keep derogatory marks on credit reports, but if you pay it off, its impact on your credit score will decrease over time until the end of the seven years. On the other hand, the FICO® Score 9 will ignore loans in collections that have been paid off, even within the seven-year window. 

Bankruptcy

The length of time personal bankruptcy stays on your credit report will vary based on the type you choose to file. Chapter 7 bankruptcy will remain on a credit report for a decade, but Chapter 13 bankruptcy will stay on a report for seven years. 

What you can do about it

For many, bankruptcy is seen as a last resort action when debt and loans become too much. After going through the bankruptcy process, it might be time to start re-establishing your credit slowly. Consider applying for a secured credit card and avoid financial decisions that could land more derogatory marks on your credit report. 

Like other derogatory marks, the impact of bankruptcy on your credit score will decrease over time as long as you stay on solid financial footing.

Student loan default

Similar to defaulting on other loans or debt, late student loan payments will sit on your report for seven years. 

However, what qualifies as default will depend on the type of loan. Federal student loans don’t go into default until 270 days after the last payment. Private student loans are considered in default after 120 days

What you can do about it

If your student loan is in jeopardy of going into default, reach out to your student loan servicer to discuss what you can do next. For federal student loans, you may have the option of consolidation or repayment based on income. However, once a federal student loan is officially in default, potential consequences are many and your resolution options are few. 

Foreclosure

Falling behind on mortgage payments to the point of foreclosure on your property can have a lasting impact on your credit report. A foreclosure will live on in your report for seven years after it’s filed. 

What you can do about it

With a foreclosure already on your record, consider keeping other existing accounts open and in good standing. Work to build up a history of on-time payments and a low debt-to-income ratio. These positive actions could help factor out the negativity of the foreclosure mark, even before the seven-year period elapses. 

Closed Accounts

While not necessarily a derogatory mark, closed accounts will stay on your credit history years after they’re gone. When you close a credit card account, it can impact your credit score in several ways. It may affect your credit utilization or, if it was an account that had been open a long time, it could impact your length of credit history. 

If you close an account that was in good standing, it will stay on your report for around 10 years, and may still have a positive impact on your credit score. However, if you close an account with a history of late payments, this account’s closure will only stay on your record for 7 years.   

What you can do about it

Deciding when and how to close a credit card account is largely personal. However, due to many factors, the account closure could harm your credit score. Be sure to weigh your options before cancelling a credit card. Even if it potentially harms your credit score, it may be the right move to make in the long term. 

While there are ways to boost your credit score in a matter of months, derogatory marks on your credit report can linger for years. However, your credit score is not a permanent record of your entire financial history. By making payments on time and keeping your accounts in good financial standing, you may see derogatory marks on credit history fade with time before they drop off your history. 

One way to help derogatory marks from overshadowing your credit history is moving towards debt-free living. With Tally, you can pay off all your credit card debt in one place, avoiding late payments and even saving money on interest along the way.