People have a lot of interesting notions regarding how long bad credit “stays on your record.”
Generally speaking, a creditor has 4 years to bring a lawsuit against you to recover after a default. The length can, however, be extended in a number of ways. A credit account, like a credit card, can remain active after an initial default if a credit card user (you) continue to make payments or use the account for purchases. Such behavior works to push the four-year “statute of limitations” forward in time as you continue to default on the account.
A default can also be “cured.” This happens when the default (like a late payment) is fixed when the payment and accompanying fees finally arrive. The account is either reinstated or cleared, and the default has been removed. Other times, default means that a debt has been “accelerated.” Acceleration is the process of calling an entire debt due, usually after an account has been in default for multiple months. The only cure is to pay off the entire amount or to enter into an agreement with the creditor to pay off a substantial enough portion of the debt to satisfy the creditor to remove the default.
The chart above shows you what effect default can have on your credit report and how long these effects can last.
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