Don't expect big score boost when unpaid debt falls off credit report

If it's been 7 years, it's so old it wasn't depressing your score much


Speaking of Credit
Speaking of Credit columnist Barry Paperno
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes "Speaking of Credit," a weekly reader Q&A column about credit scoring and rebuilding credit, for His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
Ask a question.
'Speaking of Credit' archive

Question for the expert Dear Speaking of Credit,
My husband has an unpaid credit card balance from Chase on his credit report. We live in North Carolina. The last time payment was made on this balance was in 2007. Can I assume this balance will fall off some time this year? Will it be a huge impact to his credit score? The balance is $10,000. When it falls off, his credit card balances will only total $3,500. We are hoping to secure a mortgage loan, and I wasn't sure if I should start the process or see the effect of this unpaid balance falling off first. -- Christy

Answer for the expert Dear Christy,
It sounds like you and your husband are more than ready to get rid of that 2007 bad debt and can't wait to see it gone. As you seem to know, most negative items such as late payments and charge-offs, such as your Chase debt, remain on a credit report for seven years.  What you might not know is there are some exceptions to this rule, such as collections reported by collection agencies (7.5 years from the date the debt first became late), Chapter 7 bankruptcies (10 years), unpaid tax liens (remain indefinitely) and a few others.

Specifically, the seven-year clock for a charge-off starts ticking from the first reporting of this status to the credit bureau, which is usually about six months after the first delinquency leading up to the charge-off. For collections, the 7.5 year clock starts ticking at the time of the first delinquency leading to the collection, regardless of when the collection first appeared on the credit report. For bankruptcies, tax liens and other public record items, the seven-year, 10-year, and never-ending clocks begin ticking from the date filed.

So, yes, you can assume that the removal of your husband's negative information -- original debt or collection or both -- will come off of his credit report before the end of 2014.

Starting with one of your easier questions, I'm going to recommend that you wait until the negative item is removed from your husband's credit report before starting the mortgage application process, and that you obtain credit reports for both of you from all three credit bureaus -- Equifax, Experian and TransUnion -- by visiting the website. Make sure there are no other negative items reporting and that your reports are accurate. Taking this initial step will make for a much smoother mortgage application process.

In addressing your harder questions, I'll begin by saying that I truly hate to disappoint you, but there may not be the "huge impact" boosting your husband's score you're hoping for when that negative information falls off of his report. The upcoming score bump is more likely to be a small-to-moderate one than the blockbuster you might be expecting. Let me explain.

...[T]he upcoming score bump is more likely to be a small-to-moderate one than the blockbuster you might be expecting.

One of the most important factors determining the impact of a negative item on a credit score is the length of time since the last delinquency occurred -- the longer the time period, the higher the score. And while credit utilization (credit card balance/limit ratio) makes up a large part of credit scoring -- close to one-third -- the removal of that $10,000 Chase balance is probably not having any effect on your utilization, due to the likelihood that its last reporting date to the credit bureau was many years ago. For these reasons, this Chase account may not currently have a lot of negative impact, which means that removing it is not likely to have a lot of positive impact.

I also want to make you aware of the possibility that a score can actually drop by a few points following the removal of a negative item, and I suggest being prepared for this, particularly if the rest of your husband's credit report shows all payments being made on time, low credit utilization and very few recently opened accounts. In other words, if the rest of his credit looks great!

Making sense of such a nonsensical idea will require a brief explanation, so I hope you'll bear with me. To begin with, a credit score is calculated using one of a series of scorecards, where points are accumulated based on the information in the credit report, and where the total number of points achieved results in the credit score. The process of selecting the type of scorecard to be used to score a credit report relies on a combination of credit scoring factors, including the length of time the consumer has been using credit, the number of credit accounts, the presence or absence of derogatory payment information and other information found to be predictive of future credit risk.

The idea behind this multiple scorecard system is that, in predicting credit risk, a consumer's current credit information is weighed against his or her credit history and the history of millions of other consumers having had similar credit experiences. As a consumer's credit history changes over time, so do the scorecards used to calculate the score. For example, a scorecard measuring a "clean" credit report -- no seriously late payments -- will evaluate different pieces of information and assign different sets of points to this information, than will a scorecard designed to score a credit report containing bad debt and other negative items.

A loss of points can occur, despite an improvement in the credit report, when in the process of switching from one type of scorecard to another, such as when a consumer's credit report no longer contains any negative information. Here, the new score is calculated using a scorecard made up of a different set of scoring factors and a different set of points assigned to these factors, with the result being that this new set of total points -- the new credit score -- doesn't quite add up to the number of points achieved previously.

Fortunately, a score dropping in this manner tends to be the exception more than the rule, with any lost points usually recovered within a few months. And regardless of whether the score initially rises or falls with the removal of a piece of negative information, the benefit of moving to a "better" scorecard is that a higher score can be achieved over time, as long as all payments continue to be made on time, utilization remains low and new accounts are opened only occasionally. In other words, you'll have great credit and a high score!

Hope this helps you and your husband set some realistic credit scoring expectations. Good luck to you!

See related: Credit scores: What's in them, their importance, their effect

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Published: August 14, 2014

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Follow Us

Updated: 10-23-2016

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.