Elementary school students who run afoul of their school’s rules have traditionally been threatened with a mark on their “permanent record.” Likewise, many credit card users are concerned that every credit card they ever held will forever appear on their credit report. Just as your job application won’t be turned down because of a prank you pulled in sixth grade, credit card users should understand that there are some limits to how long their mistakes will appear on their credit report.
You can expect your credit card account to appear on your credit report for up to 10 years past the date the account was last active. Positive payment history on a closed account will stay on your credit report for up to 10 years, and positive items on an active account can stay on your credit report indefinitely.
On the flip side of that, in most cases, any delinquency or default will appear on the report for seven years following the date that the account was past due. If an account is still active, negative items will be removed after seven years.
With that in mind, it’s always a good idea to check the terms and conditions — before you even apply for the card — to make sure that the credit issuer reports your activity to the major credit reporting agencies. You wouldn’t want to miss out on the long-term benefits your good behavior would have, too.
Why Does This Matter?
Having a strong credit history is very important for several reasons. Obviously, it can help you qualify for new lines of credit, including home, student and car loans as well as additional credit cards. Credit reports may also be used for pre-employment background checks and credit scores may be used to set insurance premium rates.
Your payment history is the largest component of your credit score, comprising 35% of the FICO scoring formula. So clearly, missed payments can hurt your score significantly and for as long as seven years. But keeping your accounts active and paying as agreed can help both your payment history as well as the length of your credit history, which comprises 15% of your credit score. In addition, just having a credit card can affect the types of credit used, which is another 10% of your score.
And if you’re wondering how you’re doing, you can check your credit scores for free using a tool like Credit.com’s Credit Report Card, which updates your scores monthly and gives you a breakdown of your standing in these categories. You should also check your credit reports regularly from each of the three credit reporting agencies — to make sure they’re accurate — which you can do for free once a year.
What Won’t Appear
As far as your credit report is concerned, cards that have been closed for more than 10 years will likely disappear; negative information more than seven years old is ancient history, as well. Then, there are other types of cards that never appear on your credit score at all, such as check cards, debit cards and prepaid cards. Since no credit is being extended for these types of accounts, they are never reported to the credit bureaus and the information is not factored into your credit scores.
Opening Up New Credit Card Accounts
Those who use credit cards responsibly and pay their bills on time will almost always benefit from having additional accounts on their credit report. The only downside is for those who apply for numerous new cards in a short period of time, as this will increase the number of recent credit inquiries on their credit history, which can produce a small, temporary drop in their score.
Credit card users who may incur debt or have trouble paying all of their bills on time should be very cautious about applying for new cards, knowing that missed payments can damage their credit history and credit score for seven years. Seven years is a long time, but at least it is not part of your “permanent record.”
More on Credit Reports and Credit Scores:
- The Credit.com Credit Score Learning Center
- What’s a Good Credit Score?
- How to Get Your Free Annual Credit Report
- How Do I Dispute an Error on My Credit Report?
- What’s a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life