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7 Year Limit For Foreclosures In Credit Reports

By Faye Mergel
Published: Sunday, February 14th, 2010

Foreclosures, though consumers are loathe to admit it, have been wide spread during the past two years. Driven primarily by the economic crisis, foreclosures have become the bane of consumers.

7 Year Limit For Foreclosures In Credit ReportsA foreclosure is a disastrous event for consumers. It can severely damage the confidence of a consumer and can dash their hopes and dreams in one fell swoop. An even more daunting and long term effect of foreclosures is the negative mark that it will make in a consumer’s credit reports.

Credit reports are the assurance that consumers bring to lenders to indicate their ability to pay when they want to apply for credit or loan. When a consumer’s credit report is good, the chances that a loan or credit application gets approved is quite good. A bad credit report on the other hand will mean disapproval of the application. Even if the application does get approved, the consumer will most likely get unfavorable rates.

Foreclosures are definitely very bad for a consumer’s credit report. Fortunately, the Fair Credit Reporting Act requires credit reports to be cleared of any negative information seven years after the event. While the rules do have exceptions – student rules, Chapter 7 bankruptcies and IRS debts are not illegible for this – foreclosures are not included which is great news for consumers.

With the Fair Credit Reporting Act regulation in places, consumers who were unfortunate enough to have gone through a foreclosure can expect to have that particularly damaging information in their credit report removed after 7 years. Once 7 years have passed, it becomes “out-of-date information” and the consumer’s credit report, assuming that he or she has taken care of it, will once again be bank and lender friendly.

Consumers should, however not be so complacent that their foreclosure records will automatically be removed from their credit reports after 7 years. Considering the large amount of data that travels between the three major credit bureaus of the country, they have to check their credit reports regularly, even if regularly is just once a year. Keeping an eye on their credit reports also has several advantages besides. Consumers have the privilege of getting one free copy of their credit report from each of the major credit bureaus every year.

It is recommended that consumers obtain a copy of their credit report regularly and review all the details contained therein. If there are any errors found, such as a foreclosure report that should not be in there, consumers should approach the source of their credit report and dispute these  errors.

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