When you make a mistake and do something that can damage your credit, the first question that pops to mind is often “how long am I going to suffer?”
With personal credit, the amount of time certain types of information may remain on your credit reports is spelled out in the Fair Credit Reporting Act (FCRA), a federal law.
There is no similar law that applies to business credit. Instead, standards for keeping information are voluntary.
Positive or neutral information can be reported indefinitely, so it’s possible you’ll find accounts from decades ago on your reports. Typically though, if an account is paid off and closed it will stop being reported after about 10 years. Rarely, though, do consumers worry about information that isn’t hurting their credit scores, and in fact, an older credit history can be beneficial.
Most people are worried about information that can bring down their credit scores. The two types of negative information that can be included in your reports for the longest period of time are:
- Unpaid tax liens
- Unpaid judgments
Under the FCRA, judgments may be reported for seven years, or until the statute of limitations has expired, whichever is longer. The statute of limitations varies by state, but can be as long as twenty years in some. Unpaid tax liens may be reported indefinitely. (They are removed seven years after they were filed if they were paid.) As a practical matter, though, credit bureaus typically remove these items 7—10 years after they were filed.
Additionally, a change in reporting requirements under the National Consumer Assistance Plan led to most judgments and tax liens are no longer be reported, due to a lack of sufficient identifying information. (You can learn more about those credit reporting changes here.)
Close behind those are Chapter 7 bankruptcies and dismissed (not completed) Chapter 13 bankruptcy cases, which can be reported for 10 years from the date of filing. Completed Chapter 13 bankruptcy cases are removed seven years after the filing date.
Business Credit Information That Can Be Reported the Longest
As mentioned earlier, no federal law prevents information from being reported indefinitely on commercial credit reports. The credit reporting agencies themselves set those policies. In the case of Experian Commercial Credit, the adverse information that can remain the longest is bankruptcy, which is typically reported for 10 years from the date of filing. Next longest are liens and judgments (7 years from filing date) and collection accounts (6 years and 9 months after the last report date)
Dun & Bradstreet, one of the major business credit and data agencies, notes on its website that liens that have been inactive can remain on your report for 11 or more years, and suits and judgments that have been inactive can remain for 10 or more years.
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Do You Have to Wait?
It’s important to keep in mind that with personal credit, the impact is greatest in the past two years. So while it’s frustrating to see your credit scores drop due to negative information, don’t let that stop you from adopting good credit habits (on-time payments, low debt) that over time can benefit your credit —and financial —health.
You’re not entirely shut out from getting new credit products until your scores recover either. Secured credit cards, which you can get in personal or business versions, allow people with bad credit get a credit card with minimal risk to the issuer. Essentially, a secured card requires a deposit that’s normally equal to the card’s limit. If you default on the card or miss payments, the issuer can then get what it’s owed from the money you deposited. Make on-time payments and keep your balance-to-limit ratio in check and you could quickly “graduate” to a standard credit card.
Building your personal and business credit scores while negative items age off your report can help you bounce back and get access to new credit cards, loans and other financial products faster. You can track your business credit score progress every month while you rebuild for free on Nav.com.
Editor’s note: This story was updated 8/15/2018 to reflect changes in reporting tax liens and judgments on consumer credit reports.