Long ago, in a far away place, the powers that be issued a decree that matters on credit histories would be good for seven years. In the most severe cases it would be ten years. There was no research to support the decision. It was an arbitrary number placed on unknowing consumers.
The credit ratings are based on the FICO number. This number system was started by Bill Fair (an engineer) and Earl Isaac (a mathematician) back in the 1950’s. The two came up with the concept that business decisions could be bettered decided by using the right combination of data. The age of the information was not that important to the algorithms that were created.
Back during those days, a credit mistake would follow the consumer for life. It really was a permanent record of any late payments or default judgments or any other negative action. Years of good consumer habits sometimes could not outweigh the mistakes of the past so consumers would continue to pay high interest rates if there was even credit to be had because of past misdeeds. Unfortunately, consumers were at the mercy of their creditors and there wasn’t a thing they could do.
The time limits came onto the scene in 1971 when the reporting agencies were required to quit reporting information that was older than seven years. The rules were revised in 1997 but the seven year limit was still the guiding force. There are some technical differences in how accounts are reported – like what items can be listed and when they can be listed - but for most of the situations that consumers will deal with the magic number is going to be seven.
Seven years is a long time to pay for a temporary mistake – at least for the consumer. The seven year stretch means that the lending industry is able to require higher payments from consumers that are considered at risk. The main exception to the seven year rule is bankruptcy but the limits are longer and not shorter. Bankruptcies remain on the credit history for ten years (making even more money for the lenders). Recent laws concerning bankruptcy make filing harder so consumers don’t have bankruptcy to fall back on except in the most dire circumstances.
There is some hope for consumers. In the recent past the reporting agencies have started listening to the independent researchers. Some of them are beginning to drop negative listings after just three years. Even those that aren’t completely removing the older listings are putting less value into the negatives. By the time the seven year mark comes around the negative listings are only a minor inconvenience as far as the credit score will reveal.
Consumers are told by the lending industry that credit histories can only be improved with time. This was true just a few years back. Today there are many different ways that consumers can help improve credit ratings and even remove negative credit marks from their credit histories. The seven year stretch that is repeated by industry experts is slowly losing its power over the consumer.
Credit correction professionals are recommending that consumers not wait – even with the three years that some reporting agencies are starting to utilize. The best way to get a credit history back on track is to start sooner than later. Finding qualified credit corrections assistance may be the best step to get you started in that direction.