When Does Debt Fall Off Your Credit Report?

How long do missed debt payments and derogatory marks stay on your credit report? It’s a question many people ask, especially when they have accounts in collections or are trying to rebuild their credit.

The answer depends on the type of debt. In most cases, these negative marks will drop off your report after seven years, but certain debts can stick around for up to 10 years — or even longer. The good news? These marks have less impact on your credit score as time passes, and eventually, they’ll disappear altogether.

To understand how these negative marks impact your credit, it’s important to know the timelines for each type of debt.

How long does debt stay on your credit report?

How long a collection stays on your credit report depends on the type of loan you have. According to the Fair Credit Reporting Act, derogatory items may stay on your credit reports for seven to 10 years.

Here’s how long you can expect derogatory marks, including specific types of debt, to stay on your credit reports:

In 2017, the three credit bureaus stopped adding tax liens and civil judgments to credit reports, so any tax liens or judgments you have currently should not show up on your 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 mean the debt itself disappears. Whether you still owe the money depends on the debt’s statute of limitations. This time limit varies based on the type of debt, where you live and the state listed in your credit card agreement.

Credit card companies often base their agreements on the laws of the state where they’re headquartered, which may be different from your own state’s laws. Typically, the statute of limitations ranges from three to 15 years. Plus, if you make a payment or agree to a settlement, this could restart the clock on the statute of limitations.

If you haven’t paid off the debt and the statute of limitations hasn’t expired, you’re still legally responsible for it. Creditors can continue trying to collect by calling, sending letters or even taking legal action like suing you or getting a court order to garnish your wages.

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.

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?

There are instances where borrowers feel compelled to repay time-barred debt even if the statute of limitations has passed. If you’re looking to put your debt behind you and pay what you owe — or at least an agreed-upon part of what you owe — you’ll have to talk to your creditor.

Before making the phone call, 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

What happens with collections on your credit report?

If the creditor sends your account to collections, the collections record will exist for seven years starting on the date it is filed.

Here’s how the process works:

1. 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.
2. Debt sold to a collection agency: In some cases, 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 on their own.
3. Debt collection: Once the debt is handed over or sold, a debt collector will contact you to try to recover the payment. They have the legal right to collect the outstanding balance. You may receive calls or letters asking for payment.

If you believe the collection record on your report is inaccurate, you have the right to dispute it with the credit bureaus. However, successfully disputing a claim typically results in the information being updated, not removed, unless the claim is proven to be entirely false. Often, working with a reputable credit repair company can simplify the process and may improve your results, although you can do it yourself.

New exceptions for medical debt collections

The rules around medical debt collections and credit reporting have changed, most recently in July and October of 2022 and April of 2023. In July 2022, Equifax, Experian and TransUnion enacted a rule to remove paid medical collections from their 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 three credit bureaus also announced unpaid medical collections would not appear on credit reports unless they’ve 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. This is the first time a credit score model that completely excludes medical debt has been used for underwriting these loans. The change represents a shift in how mortgage eligibility is determined, potentially benefiting borrowers whose credit was impacted by medical debt.

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, according to a survey by Peterson-KFF.

However, it’s important to fully understand what constitutes medical debt in the eyes of credit agencies. Medical debt is unpaid money from your medical bill that you owe directly to the medical provider. This can include places like a hospital, lab or doctor’s office. However, if you paid your medical bill with credit, such as with a credit card or with a personal loan, that debt is no longer medical debt, so it doesn’t receive the same protections.

Dealing with collections agency debt

Paying off a debt that has already been sent to a collection agency will help improve your credit score. However, payment at this point will not typically remove collections action from your credit profile. Instead, it’ll typically remain there for the standard period of seven years starting from the date it was filed.

Under certain conditions, however, the collections agency can remove the report from your credit profile early. One of those conditions, though rarely used, is known as a “pay for delete” letter.

“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 is not something you should reasonably expect.”

While some in the debt relief industry might bring up the option of a “pay for delete” letter, it’s important to note that using one of these letters is extremely risky. This kind of letter violates the Fair Debt Collection Practices Act. So, if your collections agency agrees to your letter and accepts your payment, but doesn’t honor their part to remove the action from your credit profile, you’d have very little recourse to get them to do so.

A letter of goodwill to a creditor is another option — and a safer one — that can sometimes manage to get the negative item removed from a credit profile. This can be successful if the unpaid debt is an isolated occurrence and you have a long-standing history with the lender, according to Tayne.

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 start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.

If a negative item on your credit report is older than seven years, you can dispute the information with the credit bureau and ask to have it deleted from your credit report.

Can you ask creditors to report paid debts?

Positive information on your credit reports can remain there indefinitely, but it will likely be removed at some point. For example, a mortgage lender may remove a mortgage that was paid as agreed 10 years after the date of last activity.

It’s up to the lender to decide whether it reports your account information to the three credit bureaus. That includes your debt that’s been paid as agreed. You can call the lender and ask to have the information reported, but the lender may not agree. However, you can add positive information to your credit reports by using your existing credit responsibly, like paying off credit card balances each month.

The bottom line

Negative marks like collections and late payments can pull down your credit score, but they don’t stay on your credit report forever. Understanding how long these derogatory items remain and what you can do about them puts you in control. Over time, their impact on your credit score will lessen, and as they fall off your report, your financial outlook can improve.

Staying on top of your payments, regularly checking your credit report and addressing inaccuracies promptly are all key steps to building healthy credit. While it can take time to rebuild, the effort you put in now can lead to a stronger credit profile and better financial opportunities.