Many people that have made credit mistakes in the past are turning to credit repair in order to improve their credit. A number of solutions are available that will allow you to improve or even restore your credit. Before taking steps to restore your credit, it is important to know about the statute of limitations.

You may be wondering why you might need to repair your credit in the first place. Credit mistakes can sometimes be unavoidable. There are times when bad credit is caused by financial hardships and times when it is caused by lack of education. No matter what the cause of your bad credit, you undoubtedly want to do something about it. In today’s world, the power to purchase comes largely from the amount of credit that you have. With good credit you can have an almost unlimited about of purchasing power. On the other hand, bad credit can leave you struggling to save up enough money to make large purchases.

The statute of limitations will play a major part in your efforts to repair your credit. If you do not know about the statute of limitation before you start working to repair your credit you could end up paying a lot more money than you have to.

Basically, a statute of limitations is a law that puts a time limit on legal action in certain situations. After this time limit has expired, a person can usually pursue legal action in a case, but the defendant can use the statue of limitations as a rebuttal to the action.

When it comes to credit, the statue of limitations essentially limits the amount of time that a creditor can legally to in order to collect payment for a debt. This amount of time will vary not only by state, but also by the kind of debt that you have. The major categories of debt are: oral agreements, written contracts, promissory notes, and open accounts. Credit cards are considered open accounts. Usually the statute of limitations for an unsecured debt is between 3 and 6 years while written contracts are anywhere from 3 to 15 years. It is important to know your state’s laws before taking credit repair actions.

The statute of limitations does not apply to all debts. Specifically, federal students loans, some fines, past due child support, and taxes do not have a statute of limitations. If you owe any of these kinds of debt you will not be able to use the statute of limitations as a defense.

It is also important that you know the statute of limitations only keeps the collector from taking legal action in order to collect the debt. The collector can still use other means to collect the debt such as telephone calls and letter, unless you specifically tell them to cease and desist. Even after the statute of limitations has expired, you still owe the debt.

Another important thing to know about the statute of limitations, as you prepare to repair your credit, is that it only applied to credit collection through courts. There are different rules for the amount of time that a negative account can be included on your credit report. Generally, negative credit information is included on your credit report 7.5 years from the date of occurrence. Bankruptcy information remains for 10 years. Even though the statue of limitations can keep you from having to pay the debt, your credit report will continue to reflect nonpayment.

Making any payments during the period before the statute of limitations has expired will restart the clock on the statute. For example, if your state’s law says that the statute of limitations on a credit card is 3 years and you make a payment during the 2nd year, the statute of limitations will start over again at 0. The collector has another 3 years to take legal action to collect the debt.

Many people are not aware of the statute of limitations for debt collections and end up paying the debt when they do not have to. If a company threatens to sue you for a debt after the statute of limitations has expired, simply inform them of this fact. Should the company continue with legal actions, the expiration of the statute of limitations can be used as a defense to have the case dismissed.

Being aware of the statute of limitations for debt collections can help in your credit repair journey.

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by SolveYourProblem.com : 2007

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