What are the retention periods for negative information on credit reports, and how do FCRA and Metro 2® guidelines determine when derogatory marks are removed?
Understanding how long negative information remains on a credit report is a top concern for consumers working to rebuild their credit and for data furnishers aiming to comply with federal regulations. The Fair Credit Reporting Act (FCRA) and Metro 2® guidelines set clear rules for the retention and purging of derogatory data.
Definitions and Context
Negative information includes late payments, collections, charge-offs, bankruptcies, foreclosures, and other derogatory marks. The FCRA establishes maximum timeframes for how long these items can be reported, while Metro 2® provides the technical standards for tracking and purging them.
Step-by-Step Retention Standards
1. Date of First Delinquency (DOFD)
- Definition: The DOFD is the date when a consumer first became 30 days delinquent and never brought the account current before further negative action (e.g., charge-off, collection).
- Importance: The DOFD is the anchor date for calculating when most negative information must be removed from a credit report.
- Metro 2® Reporting: The DOFD is reported in Field 25 (“FCRA Compliance/Date of First Delinquency”) and must be updated accurately for each reporting period.
2. Standard Retention Periods (FCRA Section 605)
- Late Payments, Collections, Charge-Offs, Repossessions, Foreclosures: Remain on the credit report for up to 7 years from the DOFD.
- Bankruptcies:
- Chapter 7, 11, and 12: Up to 10 years from the filing date.
- Chapter 13: Up to 7 years from the discharge or filing date (whichever is later).
- Paid Tax Liens: Up to 7 years from the date paid (though most bureaus no longer report tax liens).
- Unpaid Tax Liens: Indefinitely (though most bureaus no longer report them).
- Civil Judgments: Up to 7 years from the date filed (though most bureaus no longer report them).
- Inquiries: Remain for 2 years.
3. Special Scenarios
- Medical Debt: Subject to additional restrictions, including minimum reporting thresholds and waiting periods, and may be suppressed entirely in certain states.
- Active Disputes: Accounts in dispute are flagged but the underlying negative information is not removed until resolved.
4. Purging and Compliance
- Metro 2® Automation: Credit bureaus use the DOFD and account status codes to automatically purge negative information when the retention period expires.
- Data Furnisher Responsibility: Furnishers must report the DOFD accurately and update it if errors are found or if the account is brought current and then goes delinquent again.
Compliance Requirements
- FCRA: Mandates strict adherence to retention periods and requires that negative information be purged promptly when the time limit is reached.
- Metro 2®: Provides the technical framework for reporting and purging, including detailed examples and flowcharts (see Exhibit 9 in the CRRG).
Impact on Consumers
- Credit Recovery: As negative items age off the report, credit scores may improve, increasing access to credit and better terms.
- Transparency: Knowing when negative marks will be removed helps consumers plan for financial recovery and dispute errors if items remain too long.
Conclusion
The length of time negative information stays on a credit report is governed by federal law and industry standards. By accurately reporting the Date of First Delinquency and following FCRA and Metro 2® guidelines, data furnishers ensure timely removal of derogatory marks and support fair credit reporting for all consumers.