Understanding the Statute of Limitations (SOL)

There tends to be quite a bit of confusion about the statute of limitations (SOL) and how it affects your credit. This may be one of the most important credit laws and we recommend you completely understand it. If you’re unsure about the different statutes and why they’re important than this article can help give you a better understanding.

There are two statutes to know about:

1. Federal SOL
2. State SOL

Federal SOL
The Federal SOL is simple: Negative credit information cannot remain on your credit report for more than seven years. Any derogatory items—whether it be late-pays, collections, charge-offs or paid tax liens—should be removed from your credit report after seven years from the date they were entered onto your report.

There are exceptions to this rule, of course. Bankruptcies will remain on your credit report for a period of ten years, and any debts concerning the U.S. Government may remain on your report indefinitely.

State SOL
In addition to the Federal SOL, each governing state has its own SOL. While state SOL’s vary, they typically range from 3 to 15 years. This means that even derogatory information that has reached the Federal SOL may remain in your credit report until the state SOL is expired—basically, whichever comes first.

The Big Difference
In addition to length of time, a key difference between the two statutes lies in what your creditors or collectors can do about your debt within the state SOL. In California, for instance, creditors and collectors can collect from or even sue you within four years of the date the negative information entered your credit report.

They can no longer get a judgment against you (sue you) after the four-year period, but the Federal SOL allows the information to remain on your report for another three years (for a total of seven). Make sense?

For more information about the SOL and how it pertains to your credit and debt, you can visit the Federal Trade Commission’s website at www.ftc.gov or you can contact a credit repair specialist at My Credit Group.