Best Answer: Generally speaking there is a seven year rule for bad debt on your credit report. Second, there are separate laws governing consumer protection from creditors or collectors that attempt to collect an old debt. Below I will discuss this further. This is known as the statute of limitations. However, since you've made payments to the creditor this can restart the clock for the statute of limitations. This may also restart the clock on the credit report as well. You may be better off trying to negotiate a settlement directly with the creditor.
Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7.5 years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7.5 years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e. for as long as they are delinquent.
Under the FCRA, all trade lines can be reported on each of the credit bureaus. However, the reporting agencies must update and keep accurate data in their credit files. If there is erroneous information (like a collection account, that you believe is inaccurate), you must notify them (typically through a certified letter) and then wait one reporting cycle (90 days) for the errors to be removed.
The Federal Trade Commission offers a free online guide to disputing incorrect credit listings.
Once they receive your dispute letter, the bureaus will forward the documents to the creditors in question so the creditors can either challenge the dispute or correct the inaccurate listing. If
the creditors do not respond, as often happens with old accounts, the listings should be removed from your credit reports.
Statute of Limitations
All states have a body of statutes in their codes of law called, "Limitations of Actions," commonly referred to as the statutes of limitations. The idea behind these laws is that we as a society have decided that we don't want old debts hanging around forever -- we want people and businesses to be able to move on with their lives without worrying about being sued.
The length of time a creditor has to sue you depends on your state of residence and the type of debt. For example, many states allow longer for creditors to file suit to collect on closed-ended consumer loans than on credit card debts. Most states give credit card issuers three to four years to file suit after default, but some states allow as many as 10 years. Check out the Bills.com Collection Laws and Statute of Limitations page.
The site I just mentioned has more information about statutes of limitations and a list of limitations by state. If a creditor files a lawsuit after the allowed time, the court will usually throw the case out and not allow the creditor to file suit again (called dismissed with prejudice).
However, you must raise the issue of expired statute of limitations in a written response to the lawsuit, or else the court will not know that the statute of limitations has expired. Although the periods vary from state to state, I believe that there is only one (Ohio) that is longer than 10 years.
Remember: The passing of the SOL does not mean that a creditor cannot sue you. It means if a lawsuit is filed you should have an absolute defense against the lawsuit if you raise the defense. Also, keep in mind that the passage of the SOL does not prevent a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit.
I hope this information helps you Find, Save, and Learn.