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Statute of Limitations vs. Credit Reporting Time Limit

Posted on August 20, 2011

When you’re dealing with debts and negative credit report entries, there are two time limits you should know – the statute of limitations on debt and the credit reporting time limit. Many people get these two time limits confused, but it’s important that you get them straight. One impacts you in a lawsuit and the other deals with negative information on your credit report.

Debt Statute of Limitations

Each state has a law that defines how long a creditor or collector can win a civil lawsuit for a debt that you allegedly owe. The time limit varies from state to state depending on the type of debt. For example, a credit card balance may have a different statute of limitations from an installment loan.

There are a few important things to know about the statute of limitations. First, the statute of limitations is like a stopwatch. The clock starts ticking on the last date of activity on an account. It can start over if you take certain action on an account, like making a payment or payment arrangement. In some states, even stating that the debt is yours can restart the statute of limitations.

The statute of limitations does not stop a creditor or collector from filing a lawsuit against you. It’s up to you to show up in court and prove the statute of limitations on that debt has passed. That means you need to know the statute for that particular debt and you need to show that there’s been no activity on the debt since a particular date. Get an attorney to help you if necessary.

Credit Reporting Time Limit

The statute of limitations has nothing to do with the amount of time a debt can be listed on your credit report. The credit reporting time limit is defined a Federal law, the Fair Credit Reporting Act, and it’s seven years for most negative entries and 10 years for bankruptcy. After that time period, negative items should fall off your credit report and you can dispute them if they don’t.

It’s possible for a debt to have passed the statute of limitations and still be listed on your credit report because the two time limits are independent of each other. For example, the statute of limitations on a debt might be three years. If you made a payment on an account three years ago and haven’t touched it since, the statute of limitations is up. However, the debt can still be listed on your credit report for four more years since the credit reporting time limit has not expired.
The expiration of the statute of limitations doesn’t change the legitimacy of the debt. You still owe it. However, the court can’t force you to pay it if you prove the statute has indeed passed.

When you’re dealing with debt collectors and credit bureaus, it’s important that you not mix up these two terms. Disputing a debt with the credit bureau because the statute of limitations has passed will not have the item removed from your credit report. Furthermore, it shows the credit bureau that you’re not an informed consumer.

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