BY THE SURVIVORS CLUB STAFF

No one wants a black mark on their credit report. A bad debt on your credit report can affect whether or not you will qualify for a home loan or it can affect how much interest you pay for a home loan or an auto loan and it can even affect your ability to get a job. So how long, exactly, does a bad debt remain on your credit report? Most bad debts can remain on your credit report for 7 years plus 180 days from the date the delinquency is reported. Some creditors do not report bad debts immediately. That means that a bad debt can haunt you for even longer than 7 years in some cases.

How To Remove Bad Debts From Your Credit Report

Start by getting copies of your credit report from the 3 major credit reporting agencies: Equifax, Experian, and TransUnion. You are allowed one free copy of your report once each year. Begin by looking for any negative entries that are more than 7 years old. Write or email the credit bureau and request that these “expired entries” be removed immediately.

Dispute any entries that are simply wrong. Bad information ends up in credit reports every day. Write a short clear letter to the credit reporting agency saying that you dispute the entry and ask that the creditor provide verification. If the creditor is unable to provide verification the entire entry will be removed. Removing entries by dispute can take 30 to 45 days, so be patient.

How To Improve Your Credit Score

You don’t have to simply wait around for your credit score to improve. If a creditor refuses to remove a disputed item do not give up. Creditors do not have to provide a paper trail to the credit reporting agencies to prove that you have a bad debt, but they do have to provide that information to you. If you dispute a debt that the creditor won’t remove from your file, write to the creditor and demand that they provide documentation of your debt to you. They have 30 days to do this. If they cannot provide documentation (which is often impossible if the debt has been sold) then you could potentially sue them and you can certainly force them to remove the negative comment from your credit file.

There are steps you can take to add positive entries to your file. Place funds in a savings account and then ask your financial institution to give you a “compensating balance loan.” This is a loan fully secured by the funds you have already deposited with the lender. Such loans are easy to get and come at very low interest rates because they are fully collateralized. Use the proceeds of the loan to pay the loan in full in 30 days. Wait 30 days and repeat the process, with a larger compensating balance loan if possible. Again, use the funds from the loan to repay the loan in 30 days (you will need to pay a few dollars in interest from your own pocket). Request that the lender report your fully-repaid loans to the 3 major credit reporting agencies. Continue this practice for 6 or 8 months. Soon your credit report will have several positive reports that reflect your more recent activity and this will make your report look better.

TSC Sources & Recommended Resources

• Experian
• Equifax
• TransUnion