When does debt fall off your credit report?
Key takeaways
- The time it takes debt and derogatory marks to fall off your credit report depends on the type of debt or mark involved.
- In general, most debt will fall off your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely.
- Certain types of debt or derogatory marks, such as tax liens and paid medical debt collections, will not typically show up on your credit report.
When finances get tight, you may fall behind on debt payments or bills. This can result in defaults, collection accounts and other derogatory marks on your credit report. Unfortunately, these items hurt your credit score.
Getting your credit back on track starts with knowing how these negative items affect your credit and how soon they will disappear. While defaulted debts and collection accounts can stay on your credit for up to seven years, their impact on your score will diminish over time. Plus, there may be steps you can take to speed up the process and rebuild your credit faster.
How long does debt stay on your credit report?
The time it takes for a debt to fall off your credit report depends on the type of item that was reported. Here’s how long you can expect each type of derogatory mark, including various types of debt, to stay on your credit reports:
| Type of derogatory mark | Length of time |
|---|---|
| Hard Inquiries | 2 years |
| Money owed to or guaranteed by the government | 7 years |
| Late payments | 7 years |
| Foreclosures | 7 years |
| Short sales | 7 years |
| Collection accounts | 7 years |
| Chapter 13 bankruptcies | 7 years |
| Unpaid student loans | 7 years |
| Chapter 7 bankruptcies | 10 years |
In 2017, the three credit bureaus stopped adding tax liens and civil judgments to credit reports. However, other payments owed to the government, such as benefit overpayments, unpaid fines or government-backed SBA loans in default, will still appear on your credit reports.
It’s also worth noting that the clock starts on the date when the negative issue occurs. For instance, the 10-year clock on a Chapter 7 bankruptcy starts on the day you file. Payments made on debt do not reset the credit clock. However, making payments can reset the time limit for collectors to sue you trying to collect the debt.
How do you deal with debt sent to collections?
Unpaid debt can be sent to a collection agency after a set period, which usually depends on the creditor’s policies.
There are two main types of collections:
- Internal collections: If you’re significantly behind on payments (typically about six months), your creditor may hand the account over to their internal collections department to recover the debt.
- Debt sold to a collection agency: The creditor may sell your debt to a third-party debt collection agency. This usually happens when the creditor has determined they’re unlikely to recover the full amount.
Once your debt has been sent to a collection agency, it will begin reaching out for payment. After the first call, the agency is required to send you a written validation notice and adhere to the communication regulations of the Fair Debt Collection Practices Act. If a collection agency in any way violates this act, such as calling after 9:00 p.m. or making false threats, you can report it.
Either way, once the debt is sent to collections, this derogatory mark will show up on your credit report.
New exceptions for medical debt collections
The rules around medical debt collections and credit reporting have recently changed.
In July 2022, Equifax, Experian and TransUnion enacted a rule to remove paid medical collections from credit reports. Before that point, medical debt collections typically stayed on a person’s credit report for up to seven years, even after being paid off. The credit bureaus also announced unpaid medical debt would not appear on credit reports until it had been in collections for at least a year.
In October 2022, the Federal Housing Finance Agency (FHFA) approved the use of VantageScore 4.0 and FICO 10T for mortgage underwriting by Fannie Mae and Freddie Mac. These scoring models exclude medical debt, potentially benefiting borrowers whose credit was impacted by medical debt.
Finally, in April 2023, the three credit bureaus also began taking steps to remove all unpaid medical debt that totaled $500 or less from consumer credit reports. This is significant, considering that 20 million people in the U.S. (one in 12 adults) have outstanding medical debts.
The credit agencies define medical debt as unpaid money from a medical bill you owe directly to the provider. However, medical debt you paid with a credit card or personal loan, is not considered medical debt and doesn’t receive the same protections.
Will paying off collections improve your credit score?
Late payments and non-medical collections will substantially harm your credit score, and these derogatory marks can remain on your credit reports for up to seven years.
You can improve your credit score by paying your debt, but paying or agreeing to a settlement will not remove the negative item from your credit reports. While your credit score may improve, the derogatory marks will still remain.
To get a late payment or collections account removed from your credit report, you have two options:
- A letter of goodwill. You can send a request to remove a negative item, like a paid-off debt that had been in default, from your credit report. This is often most successful with a lender with whom you have an otherwise good relationship.
- Request a pay-for-delete. “A ‘pay for delete’ letter is a negotiation tool where the collector or lender agrees to remove the account from credit reports in exchange for payment of the debt — typically more than the amount owed,” says debt relief attorney Lesley Tayne of Tayne Law Group. “This strategy is best suited for smaller lenders, as most major lenders are not open to this type of negotiation and it is not something you should reasonably expect.”
It’s worth noting that pay-for-delete agreements are discouraged by the credit bureaus, and you’ll have little recourse if a collection agency refuses to follow through after you’ve paid. Very few lenders will agree to a pay-for-delete.
What happens to your credit score when derogatory marks fall off your report?
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may rise. However, your score may start rebounding sooner if you are otherwise using credit responsibly.
If a debt on your credit report is more than seven years old, you can dispute the information with the credit bureaus and ask to have it deleted from your credit report.
Do you still have to pay a debt that fell off your credit report?
When a debt falls off your credit report, it doesn’t necessarily mean the debt itself disappears. Whether you still owe the money depends on the debt’s statute of limitations, or the time limit for collectors to take you to court over unpaid debts. This time limit varies based on the type of debt and your state.
Typically, the statute of limitations for suing you on unpaid debt ranges from three to 15 years. But, if you make a payment or agree to a settlement, this could restart the clock on the statute of limitations.
An unpaid debt that is past the statute of limitations is considered “time-barred.” This means that creditors can no longer sue you to collect the debt, but it doesn’t mean you no longer owe it. How you handle a time-barred debt is up to you. According to the Federal Trade Commission (FTC), you have a few options:
- Pay nothing: Since the debt is time-barred, creditors can’t take legal action to collect, though they might still try to contact you.
- Pay part of the debt: You could negotiate with the creditor to settle for less than the full amount. Just be cautious because making any payment can restart the statute of limitations, making the debt legally collectible again.
- Pay the total outstanding debt: If you feel morally obligated or want to put the debt behind you completely, you can choose to pay the full amount.
Keep in mind: Regardless of which option you’re considering, talk to an attorney about your best path forward before contacting a debt collector.
Depending on your state, debt collectors might be allowed to call you to try to collect on a time-barred debt. However, creditors and debt collectors can’t sue you or threaten a lawsuit to collect on a debt that’s outside of the statute of limitations.
Should you pay a debt that has passed its statute of limitations?
While it’s not legally required, there are instances where borrowers feel compelled to repay time-barred debt even if the statute of limitations has passed.
Before paying the debt, make sure you know:
- That the debt is legally yours
- The date of the last payment on the account
- How much you owe the creditor
- What you can realistically afford to pay per month or in a lump sum
- Whether or not your payment will restart the statute of limitations
Keep in mind: If you negotiate a payment for less than the full amount owed, get the payment agreement in writing from the collector before you send any money.
Next steps
It generally takes seven years for settled debts to fall off your credit report. But, aside from paying off your debt, you can take other steps to rebuild and repair your credit even while old debts remain on your report, including:
- Making payments on time
- Limiting your credit usage
- Disputing inaccurate information on your credit report
By sticking to good credit practices, you can begin seeing results in as little as three months. While it takes time to undo the effects of debt defaults and collections, the effort you put in now can lead to a stronger credit profile and better financial opportunities in the future.
