How Long Do Unpaid Debts Show on Credit Reports? Missed or Late Payments, Loan Default or Filing for Bankruptcy

Everybody has a credit report and any unpaid debt will be registered with U.S. credit reference agencies. Filing for bankruptcy, missed or late payments and even simple credit searches will show for a specific period of time. There are even instances when entries are recorded in error.

How Long Do Credit Searches Show on a Credit Report for?

An application for a loan, bank account or charge card will lead to a credit search being recorded on a credit report. This will show for precisely 12 months from the date the search was made. Having an excess of searches can lead to a credit application being declined as it sets off alarm bells with lenders. Check for multiple searches as it is possible to ask credit reference agencies to remove these under the Fair Credit Reporting Act 1970.

Filing for Bankruptcy Under Chapter 7 or Chapter 13

Filing for bankruptcy will show on a credit report for a period of 10 years. Filing under chapter 7 or chapter 13 is more serious than missed or late payments or even loan default, but it isn’t the end of the world. Provided that repayment is made on the mortgage and other financial agreements, a FICO score has been known to improve after as little as 12 months.

Missed or Late Payments

Any missed or late payments will be visible on a credit report for a period of seven years. This variety of unpaid debt is less serious than filling for bankruptcy or loan default, but it will make applying for credit more difficult. The effect on FICO scores won’t be as serious so recovery is possible.

Loan Default or Court Judgments

A loan default or court judgment will also affect a FICO score for up to seven years. Some lenders will apply to the court to get a lien or encumbrance against a property. The effect of this is that an unsecured credit card debt is turned into a secured debt on the family home. Filing for bankruptcy provides protection against this taking place.

Mortgage Foreclosure

A mortgage foreclosure also shows on a credit report for a period of seven years. The effect on a FICO score will become less after each passing year. Homeowners that are unable to make their repayments may find that a short sale is a more satisfactory means of achieving the same objective. If the mortgage provider is prepared to settle the debt as “paid in full”, there may be no impact on a credit score at all.

All forms of missed or late payment, including loan default and mortgage foreclosure, will show on a credit report for a minimum period of seven years. The exception is filing for bankruptcy, which will show for no more than 10 years.