“A small debt makes a man your debtor, a large one your enemy”.
So, its “better to go to bed hungry than wake up in debt”. Because, “out of debt, out of danger”. No borrower wants to become a slave to the lender. That’s why, it's wise to keep track of your debts and scrutinize your credit report at regular intervals, in order to pay them off soon.
Credit report clock vs sol clock
Are you confused with credit reporting time limit and statute of limitations (SOL)? Do you think that once your SOL period is over, debts will no longer be there in your credit report? If yes, then quickly check out this write-up.
Credit Report: Your financial report card
“Debt is beautiful only after it is repaid” - So, pay off debts on time to keep yourself away from collection calls. Always remember even if you forget, the debt still stays on your credit report for a particular time.
A credit report is a precis of your financial history. It contains a detailed note of a person’s credit history and is prepared by a credit bureau or credit reporting agencies. Your credit report acts as the risk meter which makes creditors and lenders decide where you stand financially as a borrower. It’s an important tool helping you to manage your finances well.
Credit bureaus list information which they get from public records, collection agencies, credit card companies, banks, retailers, mortgage companies and other lenders in your credit report. Your credit report is updated routinely as soon as the status of your accounts get reported to the credit bureaus. Each of your financial actions is noted down and the negative information stays on the record for a definite time period.
Statute of Limitations: Fear of getting sued
Amongst the various debt time frames, the most important one is the Statute of Limitations. Statute of limitations denotes a rule that sets a deadline within which someone can file a litigation against another flock.
Both civil and criminal causes of action has statute of limitations. It begins from the date when you get delinquent on your debt. Many statute of limitations are actual legislative statutes, while others may come from judicial common law.
It is a type of federal or state law, which determines the time period in which someone can sue you. If there is less financial evidence, then this law protects a consumer from being sued. An expired sol period does not block debt collectors from trying to collect debts, but they can’t simply sue you.
Are sol clock and credit reporting clock dissimilar?
As clocks show us time, similarly debt clocks display debt timings in the credit report. There are two debt clocks - sol clock and credit-report clock. Both are important. Are you getting muddled between the two types of debt clocks? No need to worry. Find out your answer just now.
* Statute of Limitations Time Limit - The Statute of Limitations clock force collections on a debt. So if you are concerned about reviving the forced collections on an old debt, then keep a close watch at the precious time of this clock.
It displays the time limit in which a creditor can sue you for non-payment of debts. The timeline varies from state to state. The clock starts ticking from the time of last payment and resets every time you make a payment, therefore re-aging your debt.
* Credit reporting Period - This clock showcases the time period a debt can stay on your credit report and in turn affect your credit score. According to Chi Chi Wu, staff attorney with the National Consumer Law Center, “The credit-report clock on delinquent debt starts six months after you stop paying”.
For most items, the credit reporting timeline is mandatory as per the Fair Credit Reporting Act and is a matter of federal law. Irrespective of where you live, the credit reporting period for a collection account is seven years.
A final guide
Finally, it can be concluded that a Statute of Limitations clock and a Credit Reporting clock differ from each other. The first only shows the time when you can get sued by the creditors for non-payment of debt. While the second one shows, how long an old debt remains in your credit report. So, the next time you are asked about the difference between SOL clock and Credit Reporting clock, hopefully you’ll answer all the questions with confidence.