Month: October 2018

The SOL clock and the credit report clock are distinctly different from each other. Find out how in this article.

What is an SOL clock?

Would you believe me if I said that debt has an expiry date? Yes, it’s true. I ain’t joking. Debts are subject to the statute of limitations (SOL), which specifies how long a debt collector can sue you to collect any unpaid balance. Usually, it starts from the day of your first default on the debt.

The SOL clock ticks at a different pace depending on the following factors:

• The state where you live in
• The type of debt you have

How long does the SOL clock tick in all the states?

State	Oral contracts	Written contracts	Promissory notes	Open-ended accounts
Alabama	6	6	6	3
Alaska	6	6	3	3
Arizona	3	5	6	3
Arkansas	3	6	3	3
California	2	4	4	4
Colorado	6	6	6	6
Connecticut	3	6	6	3
Delaware	3	3	3	4
Florida	4	5	5	4
Georgia	4	6	6	6
Hawaii	6	6	6	6
Idaho	4	5	5	5
Illinois	5	10	10	5
Indiana	6	10	10	6
Iowa	5	10	5	5
Kansas	3	5	5	3
Kentucky	5	10	15	5
Louisiana	10	10	10	3
Maine	6	6	6	6
Maryland	3	3	6	3
Massachusetts	6	6	6	6
Michigan	6	6	6	6
Minnesota	6	6	6	6
Mississippi	3	3	3	3
Missouri	5	10	10	5
Montana	5	8	8	5
Nebraska	4	5	5	4
Nevada	4	6	3	4
New Hampshire	3	3	6	3
New Jersey	6	6	6	6
New Mexico	4	6	6	4
New York	6	6	6	6
North Carolina	3	3	5	3
North Dakota	6	6	6	6
Ohio	15	15	15	6
Oklahoma	3	5	5	3
Oregon	6	6	6	6
Pennsylvania	4	4	4	4
Rhode Island	10	10	10	10
South Carolina	3	3	3	3
South Dakota	3	6	6	6
Tennessee	6	6	6	6
Texas	4	4	4	4
Utah	4	6	6	4
Vermont	6	6	5	3
Virginia	3	5	6	3
Washington	3	6	6	3
West Virginia	3	10	6	5
Wisconsin	6	6	10	6
Wyoming	8	10	10	8

Debts fall into 4 categories. You need to know what type of debt you owe. Otherwise, it will be tough for you to determine the statute of limitations period for a particular debt. Keeping your concerns in mind, we have briefly described all 4 categories of debt here.

1. Oral contracts: These are debts that were initiated based on a verbal agreement to pay back the money within a specific period.

2. Written contracts: All debts that come with a written agreement fall into this category. The terms and conditions of a loan are mentioned in a written contract. A typical example is medical debt.

3. Promissory notes: These are written agreements to pay off the debt in installments at a specific interest rate and within a particular debt and time. The typical examples are student loans and mortgages.

4. Open-ended accounts: These are accounts with a revolving balance. You can borrow money from these accounts and then pay them off. But you have the option to borrow again. The biggest examples of open-ended accounts are credit cards, store cards, etc.

How can you restart the SOL clock?

The easiest way to restart the SOL clock is to acknowledge the debt. Let’s suppose a debt collector calls you and asks, “Do you admit you owe $5000 to us and you’re not willing to pay it?” and you say “Yes, I can’t pay the amount, but I agree I owe it.” This is considered a reaffirmation of the debt, and the statute of limitations period will restart again.

You can also restart the SOL clock by making a small payment on the debt.

Let’s suppose, you get a call from the debt collector. The person asks you to make a small payment on the time-barred debt. You send $20 to the debt collector and the SOL clock starts ticking all over again.

Can you get sued after the SOL clock has stopped ticking?

A debt collector can try to collect a debt even after the statute of limitations period has expired. Don’t ignore a legal notice even if it’s an old debt. Be present in court and state your side of the story. You can even consult a debt attorney to win the case. He can also file a lawsuit against you for collecting a time-barred debt. You have to inform the court that the SOL period has expired on the debt. This is your best defense against the lawsuit.

Several consumers don’t appear in court, which is a bad financial move. It helps the debt collector to win the case and get a judgment against the consumer.

What is a credit report clock?

The credit report clock starts ticking after you open a credit card account or borrow a loan.

If you use credit cards responsibly and make monthly payments on time, then the clock ticks for an indefinite time period. But when you default on your credit cards or loans, the credit report clock ticks for 7 years and 180 days from the date of your first default. For instance, if you made a late payment in May 2015, then it would come off of your credit report in May 2022.

In the case of Chapter 7 bankruptcy, the credit report clock ticks for 10 years. However, if you file for Chapter 13 bankruptcy, then the clock ticks for 7 years since you’re making an effort to pay off your debts within 3 to 5 years.

Find out how long the credit report clock ticks for other tradelines. Have a look at this table and see how long the information stays on your credit report.

How long does a credit report clock tick for different tradelines
1. Active account paid as agreed	As long as the lender is reporting it
2. Closed accounts paid as agreed	Up to 10 years
3. Late payments	Up to 7 years and 180 days
4. Debt collection accounts	Up to 7 years and 180 days
5. Chapter 7 bankruptcy	Up to 10 years
6. Chapter 13 bankruptcy	Up to 7 years and 180 days
7. Paid judgments	Up to 7 years and 180 days
8. Unpaid judgments	For 7 years but can be extended indefinitely
9. Foreclosure	Up to 7 years and 180 days
10. Short sale	Up to 7 years and 180 days
11. Repossession	Up to 7 years and 180 days
12. Hard inquiries	Up to 2 years
13. Paid tax lien	Up to 7 years from the date government filed it
14. Unpaid tax lien	Up to 10 years from the filing date

How is the SOL clock different from the credit report clock?

The credit report clock tracks how long information can stay on your credit report. The SOL clock determines how long creditors can sue you for your debts and garnish your wages. So both have different implications. The statute of limitations period has nothing to do with how long unpaid debts can stay on your credit report.

A time-barred debt can still appear in your credit report. For instance, the SOL period in Texas is 4 years for all kinds of debts. If 4 years have passed since the day of your first default, then the debt has become time-barred. A debt collector can’t garnish your wage now. However, the debt will stay on your credit report. It won’t be removed from your credit report before 7 years and 180 days.

The big question is how can you remove debt from your credit report after the statute of limitations clock has stopped ticking? The honest answer is you can’t. You have to wait for 7 years and 180 days. However, you can request your creditors to remove debts from your credit report on the basis of the good relationship you have with them. But this is an exceptional case.

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You can’t afford to be nonchalant about the relevance of finance in today’s time. If you are a credit cardholder, have pending bills to make, debts to repay, and income statements to issue – it is imperative to be familiar with the various kinds of credit-related terms. For instance, do you know what a credit score is? Are you aware of the basic difference between credit reports and credit scores? Did you know that you can obtain a free credit report?

If you are confused between the two terms, you can be assured that here you will find a simple version of what is meant by credit report and credit score.

Features of a credit report

1. The credit report is informative

As the name suggests, a credit report contains all your detailed financial information such as the history of your debt accounts and the payments you’ve made. It consists of information about credit card payments, and a variety of loans such as home loans, automotive loans, and student loans.

In addition to that, it contains the status of those loans which are doubtful and are yet to be paid off.

2. The credit report is personal

A credit report also includes a wide range of personal information such as your name and address, business address, phone number, and several other information. The credit report which is registered under your name also has the detailed account details of your loan/credit card information of the loan taken, current balances, and information about whether or not you have paid the bills on time as well as the account in arrears. In a nutshell, a credit report records how well a person has kept up with his/her payment agreements with various current and previous creditors as well as the current balances on the account.

3. A credit report is diverse

In a credit report, a person can also get information about the listed inquiries that have been for new credit.

4. Your credit report won’t contain the credit score

Each of the three major credit bureaus – Equifax, Experian, and TransUnion, offer a free copy of the report once a year. It should be known to the user that the report is less likely to contain a credit score; so forget about depending on the report to obtain a credit score.

Features of a credit score

1. Credit score reveals the exact number

A credit score represents the statistical three-digit number between 300 and 850, which is generated on the basis of your credit report. It is generated from a person’s payment history, accounts owed, credit types, length of credit history, and types of credit.

2. Credit score is calculated

A credit score is calculated after scrutinizing the person’s debt against credit limit, history of debt repayments, number of accounts, type of accounts, the overall credit history, and several other financial information.

It is basically your financial report card.

3. A high credit score can be beneficial

If you have a high credit score, there will be a greater chance of taking out a new credit at lower interest rates. This will also impress lenders and they will be more than willing to sanction a person’s new credit request.

4. Your credit score contains your payment history

You ought to know that your payment history is a vital factor to consider while calculating your credit score. The credit bureaus also check past due accounts, for how long they are past due, whether or not the accounts are properly managed and if they contain any negative information.

What’s the major difference between credit reports and credit scores?

a. Credit reports are more insightful

Compared to a report, the credit score just gives a statistical indication of the number. If you have observed that your score has dropped, then the only way to determine the cause is through a credit report. A credit report gives details for things that could have caused the drop, like delinquency on payments or hard inquiries.

b. It is possible to get credit reports for free

In comparison, a credit score is usually not free of cost. Companies like American Express, Bank of America, and Chase provide customers with free FICO score monitoring. This includes an estimate of their score either online or in their monthly statements.

c. Employers can look at your credit report but not your score

Potential employers can look at your credit report with your permission. A credit report reveals a lot about your character. To a hiring manager, you may seem to have a lot more responsibility on the job or less of a risk for corporate crimes. It is estimated that nearly 47% of employers run credit checks to select job candidates. However, contrary to that, employers do not get to see your credit score when they are viewing the report.

d. Credit reports can disclose mistakes and identity theft

People often complain about the errors found in the credit report. A mistake can be something as silly as a typo or an incorrect credit limit. It could be something as serious as someone hacking into your account to rack up the debt in your name. To fix the error, you will have to contact the credit bureau and the company which reported the information.

e. Your credit score may change faster than your credit report

If you have subscribed to a credit score monitoring service, you will have an idea about the status of your score and that it can fluctuate frequently. It is due to the constant reporting of the creditors to the credit bureaus on a regular basis.

How can I access my credit report and credit score?

A credit report can be fully accessed by contacting any of the three credit reporting agencies. You can also visit the official website of the respective credit reporting agency and follow the instructions to proceed further. You will be told to file an online request form and send it along with a draft or cheque to cover the fees.

What is a good credit score?

A score generally ranges between 300-850; a credit score of 700 or above is normally considered good.

A word of advice you can follow while obtaining your credit report and score at least once a year, especially before applying for a new loan or credit card. Just to avoid making any errors, keep checking your credit reports regularly. Make it a habit to pay on time and limit your credit card usage by up to 30%.

Also, check your reports for any errors and dispute them immediately to get a good score. Ensure that your credit score doesn’t drop as compared to your average score.

How are they associated?

A higher credit score indicates that your creditworthiness is also high. The lower the score, the lender’s/creditor’s risk increases to grant your loan request. So, while your credit report comprises your entire credit history, your credit score is the total sum of the same.

If your credit score is within a certain range, your lender may offer a loan at a lower interest rate or provide you with a credit card with a higher credit limit, though all other terms and conditions might be the same.

Now that you have a clear understanding of your credit report and credit score, it’s time to go through your report and focus on improving your credit score. This will help you sort out the financial riddles of your life.