Dear Liz: I co-signed a lease agreement for a friend in 2006. The friend flaked on the lease a few months later, so this debt is on my credit report. Everything I’ve read about credit reporting says it should fall off my credit report in seven years. But every few months the collection agency updates my credit report because they are adding interest onto the collection amount, which then updates the date of last activity as well. Does this restart the clock on how long the debt can be reported? Or is it still considered from when the account first was delinquent? I had contact with them a few years ago, trying to negotiate a settlement to clear my credit report, but we never agreed upon an amount and I never acknowledged that this was my debt. I’ve been trying to buy my first home for two years, and this has been the one thing holding me back, causing a lot of heartache, so I’m trying to be as informed as I can about it.
Answer: The clock on reporting most negative marks begins when the account first goes delinquent and isn’t reset when a creditor or collection agency updates or sells the debt. If the collection agency continues to report the debt after seven years and 180 days passes, you should be able to dispute the entry with the credit bureaus and get it removed from your credit reports.
You also may need to be concerned about your state’s statute of limitations for this debt. This statute affects how long you can be sued over a debt, which can vary from three to 15 years. In some states, the statute can be extended if you make a payment on the debt or even acknowledge it as your own.
If you’re at risk of being sued, you may want an attorney’s advice about how to proceed and whether you should try to settle this account. You can get a referral from the National Assn. of Consumer Advocates at http://www.naca.net. Even if you aren’t at risk of a lawsuit, it could pay to get this debt resolved. As you’ve learned, mortgage lenders typically aren’t willing to lend money to people with open collection accounts on their reports.