If you got in over your head and had to simply stop making payments on one or more credit card accounts, you know it’s done damage to your credit scores.
At first the account will show on your credit report as 30, 60, or 90 days late. Eventually it will probably become a charge-off – sitting there on your credit report doing you damage.
The good news about that is that as time passes and you keep all other accounts current, the importance of this default will recede and your scores will begin to inch higher. Then, after 7 years from the date the account became delinquent, the charge-off will be dropped from your report.
Do check to make sure this has been done – studies show that over 70% of all credit reports have errors, and failure to remove negative information on time is a common one.
When this day passes and the information is removed from your credit report, your credit scores will see an immediate increase.
The bad news is that this won’t stop creditors from hounding you. In fact, collection attempts can go on forever, in spite of the Statute of Limitations.
The Statute of Limitations is different from state to state, but for unsecured debt such as a credit card it is typically 4 to 6 years from your last payment date. Once a bad debt or charge-off outlives the statute of limitations, you cannot legally be sued for collection. If a creditor does sue you after this date, you can counter-sue and collect.
But just because they can’t sue you doesn’t mean they will stop harassing you.
When a credit card company charges-off a debt they can recoup a small portion of their loss by selling the debt to a collection agency. If that agency is unsuccessful in collecting from you, they’ll sell it for a bit less to another collection agency. This can go on for years – selling for less each time.
And, each time a new collection agency buys your credit card debt, they’ll attempt to collect. Some of them can be very aggressive in their efforts, despite the rules set forth in the Fair Debt Collection Practices Act (FDCPA).
The good news about that is that if your debt has outlived the Statute of Limitations, you can tell collectors to stop contacting you. If they persist, they’re in violation of the FDCPA and you will report them.
But of course, once they’re forced to cease their efforts, they’ll just sell the credit card debt to someone else, and you’ll have to tell them the same thing.
So, the good news about old credit card debt is that it will cease to harm your credit scores after 7 years. The bad news is that you may be dealing with debt collectors for the rest of your life.