If your credit has taken a blow, it’s important to start the rebuilding process as soon as you can. However, don’t expect marks against your score to disappear any time soon – your long-term credit history report will keep record of them for up to seven years.
In general, negative information more than seven years old from the date of last activity (ten years for bankruptcies) must be removed from your file according to Canadian law. It’s important to note, however, that one cannot simply “wait out” a debt for seven years and allow it to drop off their credit report. Just because a credit reporting agency has let an item be removed does not mean that your obligation to the debt vanishes.
The benefit of a cyclical system for long-term credit history is not in that it is designed to absolve consumers after a set period of time. On the other hand, the seven-year system exists to allow debtors the chance to show the effects of personal financial changes they have hopefully made over that time period as they go in search of new major life goals that require credit. The good news is – it’s impossible for an item to “restart’ its seven year countdown on your long-term credit history. For example, say you were 60 days late on a credit card payment in December 2010. This late payment should fall off your credit report in December 2017. Let’s also say that you caught up on your payments and made all future payments on time until August 2013 when you became 90 days past due. Your previous late payments from December 2010, will still fall off in 2017. The late payment from August 2013 should fall off your credit report in August 2020.
Even though debts still exist after seven years, having them fall off your credit report can be beneficial to your credit score. Once negative items fall off your credit report, you have a better chance at achieving an excellent credit score, granted you pay all your bills on time. Rather than thinking of debt as an item that will eventually go away, take an active approach in reducing your debt, minimizing interest payments, and improving your financial quality of life.