It’s common knowledge that having debt can have a negative impact on your credit score. Your credit report contains a list of all of your missing or late payments, which is one of the reasons why your credit score is directly tied to your credit report.

And if you’ve ever had trouble paying your debts, you might be curious about the length of time that negative information stays on your credit report.

A credit report is like a snapshot of your current financial situation. When deciding whether or not to offer credit, creditors look at borrowers’ credit reports and scores. At some point in life, most people will find themselves in a position in which they have no idea what their credit score is. When you first start learning about money, one of the first things you hear is how vital it is to have a good credit report.

Your credit report could contain both positive and negative information about you. The good news is that credit scores can be improved with some effort. First, the information is not permanent. Your credit score will consequently improve if you add positive information to your report while simultaneously removing any unfavourable information.

Why Does Credit Report Information Last So Long?

Lenders might get an indication of your level of financial responsibility from the information contained in your credit report. Information remains on credit reports for predetermined lengths of time. The objective is to provide precise estimates of your ability to repay debts. Most information on credit reports remains on file for six to seven years, depending on a variety of criteria.

This period is sufficient to show creditors any peaks and valleys that have occurred in your credit history. Your credit score will increase proportionately to how well you handle your finances on average. A precise evaluation cannot be carried out in just a few months.

It would be too critical for information to be kept and shared for life. It is preferable to have information available for a finite amount of time. It enables the correction of errors from the past while also ensuring that you reimburse your creditors.

How Long Does Good Credit Information Last?

Your repayment history, the length of the loans you’ve held, the sums you’ve borrowed, and the types of loans you’ve had are all examples of positive information that may be found on credit reports. If you keep your debt under control, this information will be seen as a positive one. In general, every account that has been paid as promised, whether it is active or closed, will produce positive information.

This could demonstrate to creditors that you make payments on time and regularly, as well as that you are capable of managing multiple sorts of loans. After 10 to 20 years, credit bureaus will typically discontinue displaying positive information on a person’s credit report.

Equifax and TransUnion are the two firms that are considered to be Canada’s credit bureaus. They each use their own particular methods of reporting. They can store information for durations of slightly varying times.

How long does negative information last?

Your credit record will have negative information for a shorter amount of time going forward. The majority of information is retained for a maximum of six to seven years, depending on the most important criteria. Some of the information is revealed more quickly than others. In the case of bankruptcy, there is one notable exception. Your report may contain information for a period of up to 14 years after the event.

Read the following information on the various types of negative information and the length of time they remain on credit reports.

Late payments

Your credit report may continue to reflect late payments for up to 6 years after the date they were reported. Even if you pay off your overdue balance, Equifax will still show it on your credit record. If you made a late payment in August 2014, for example, Equifax would not remove the negative information from your credit record until August 2020.

Collections

If you don’t make your payments on time, your account may be turned over to a collection agency. If this occurs, the information will remain on your credit report for six years beginning on the date of your most recent payment, regardless of whether or not the outstanding debt was paid in full.

Your credit score is likely to take a substantial hit if your credit report reveals that any of your accounts have been turned over to a collection agency. This can happen if you have more than one account.

Garnishment

A garnishment is a legal process that allows a third party to deduct payments directly from your bank account. This is done to satisfy a debt owed to the third party. Garnishments are typically used in situations in which the debtor owes money to the government in the form of back taxes, child support payments, fines, or payments on a student loan.

Your credit report will include the garnishment for six years beginning on the date it was filed. 

Judgements

If you are delinquent on your payments for an extended period, the lender or debt collector may eventually initiate legal action against you. A judgement is the formal ruling that a court makes in response to a case being brought before it. Judgements will remain on your Equifax report for six years beginning on the date the ruling was issued.

Inquiries

Every time you apply for credit and a prospective lender or creditor requests a copy of your credit report. A hard inquiry is a term for this type of credit check. Your credit report will contain a hard inquiry for the next three years after it has been performed.

Consumer Proposals

The consumer proposals that are included in credit reports will be removed by Equifax three years after the debt has been fully paid off, as per the terms of the agreement. After three years, TransUnion will remove it, or six years after you sign the proposal. whichever comes first. 

Bankruptcy

Declaring bankruptcy is the most serious step that can be taken to deal with debts.  A bankruptcy will stay on TransUnion and Equifax credit reports after the discharge date for a total of six years. If an individual files for bankruptcy two times, both will remain on their credit report for 14 years.

Debt Management Plans

Credit counselling services and creditors work together to formulate debt management plans. Although these plans are not official, they do make it possible to consolidate debts. The two credit bureaus will stop reporting that you have paid off your debts after two years have passed.

What to do on Your own to Get Negative Information Off of Your Credit Report

• Request that your creditors take them away — Under certain conditions, you might be able to persuade your creditors to take down the negative information from your credit report. For instance, if you’ve never been late on a mortgage payment before but you do so accidentally this time, you might be able to persuade your creditor to delete it off your credit report.

• Make a dispute request to the credit agency you use — You can check for mistakes in your credit report by requesting a free copy of your annual report from the credit agency you use. You have the right to make a complaint with the credit bureau if you believe that your report contains inaccurate information. The creditors have a period of thirty days during which they must react to your complaint. Always remember to back up your claims with evidence.
• Complaints should be reported to The Financial Consumer Agency — The Financial Consumer Agency of Canada is the place to go if you find errors in your credit report. Financial institutions and credit card firms may have made errors, and the agency can assist you in resolving those errors.

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