Lenders may remember old charge-off forever

Dear Speaking of Credit, Lenders may remember old charges.
I recently fixed my credit after a bad time in 2008 and 2009 when I had a lot of charge-offs. I’ve been waiting for all of those to come off my credit report. It has, and I have gotten back on my feet. I was just approved for a few American Express cards with high limits. But Chase turned me down. They told me on their reconsideration line that they couldn’t give me any credit because I had a charge-off with them in the past. Lenders may remember old charges.

I know it’s not surprising that a bank like Chase will always hold that over me, but isn’t that against the law? I thought they couldn’t talk about that anymore after the 7.5 years it was on my credit report. Thanks for any help you can give me. u2014 Mack Lenders may remember old charge

If you want to know if this Bank of America card is right for your wallet, read on.

Dear Mack,
You should feel proud that you have been able to restore your credit standing following some tough times a number of years back. However, it appears that you’ve recently encountered a reminder that the past you once believed to be behind you can still resurface. Lenders may remember old charges.

By now, it’s common knowledge that negative but accurate information must eventually be purged from credit reports. That may have led you to believe that once your Chase charge-off had been removed from your credit report, it would no longer hurt your ability to obtain new credit. But you found out otherwise. Lenders may remember old charges.

Answering your question, Chase’s denial of credit to you for the reason stated is legal and is based on the same kind of common sense that any of us might employ if we were in a lender’s shoes. It’s the kind of sense that says one should think twice before extending new credit to someone who defaulted on a debt in the past. Lenders may remember old charges.

This is what Chase has done by denying you credit based on an old charge-off you had with them. And while the Fair Credit Reporting Act establishes the length of time information can appear on a credit report, neither it nor any other law prevents a lender from denying a credit application because the applicant defaulted on a past debt. It’s not on your credit report anymore, but it is in their internal files. Lenders may remember old charges.

You haven’t told us whether any of those debts had eventually been paid after charging off. If any have not, be aware that for any charged-off debts that still remain unpaid after their removal from a credit report, some additional impacts could result. Including what you’ve experienced, there are at least three examples of how some aftershocks following an old unpaid debt can continue to be felt many years later and after all evidence of the debt has been removed from the credit report: Lenders may remember old charges.

1. Denial of new credit
2. Filing suit to collect
3. Continuing to collect

1. Denial of new credit
Your situation is one example in which a current credit application is denied due to derogatory information that is no longer being reported by the credit bureaus. Some lenders may also refuse to extend credit to consumers who filed for bankruptcy so long ago that all references to it have been removed from the credit files. Public records, such as judgements, tax liens and bankruptcies, remain accessible to lenders and the general public after the credit bureaus have stopped reporting them. Lenders may remember old charges.

2. Filing suit to collect
The length of time during which a consumer can be sued to collect a debt is set by the statute of limitations that applies to the state where the consumer resides. These rules tend to vary among states, with most statutes of limitations for debt collection ranging from three to six years from the date the debt first went past due, though for a few states the term can be up to 10 years. Consumers living in these states and having unpaid defaulted debts up to 10 years old, whether on or off their credit reports, can continue to face the possibility of a lawsuit. Lenders may remember old charges.

3. Continuing to collect
Despite a debt having fallen off a credit report and the statute of limitations having expired, a collector can continue to contact a debtor for payment, providing the consumer’s rights under the Fair Debt Collection Practices Act are respected. Fortunately for consumers, and thanks to the FDCPA, any debtor aware of his/her right to stop all further communications from a collector can simply provide the collector with a written request that all future contact be ended. Without such formal notice, a creditor can contact a consumer for payment on an old debt indefinitely. Lenders may remember old charges.

Despite the negatives just described for holders of old, especially unpaid, debt, there is a positive aspect to this situation. Many card companies and other lenders understand how someone like you who has experienced problems in their past can still present low future credit risk. Look for lenders who are willing to overlook some credit issues. They’re out there. Lenders may remember old charges.

See related: How long negative information stays on a credit report, Minimizing score damage after a charge-off