Why did FICO choose 7 years for negative information to remain?????

[I_SUFFER_FROM_FICO_ENVY]

There must be a statistical relevance to this, right? 

At first glance, 10 is a round number.  We have the 10 Bill of Rights; the 10 Commandments; our number system is based on 10; David Letterman has his "Top 10", etc...  So, if FICO were arbitrary, it would keep ALL negative information for 10 years.

So, I ask, how/why did FICO choose 7 years to keep negative information?  And, I wonder why they keep GOOD information for 10 years after it is closed.

[Anonymous]

I believe retention of information on reports is controlled by the credit bureaus, not FICO.

A different issue is for how long a derogatory affects your scores.

I believe this is derived statistically, from doing longitudinal studies on credit reports.  I don't think it's a case of FICO folks pulling magic numbers out of a hat.

[trix_r_4_kids]

I believe it stems from the Bible.

Deuteronomy 15

The Year for Canceling Debts

At the end of every seven years you must cancel debts. 2 This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the Lord’s time for canceling debts has been proclaimed. 3 You may require payment from a foreigner, but you must cancel any debt your fellow Israelite owes you.

[Anonymous]

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@I_SUFFER_FROM_FICO_ENVY wrote:

There must be a statistical relevance to this, right? 

At first glance, 10 is a round number.  We have the 10 Bill of Rights; the 10 Commandments; our number system is based on 10; David Letterman has his "Top 10", etc...  So, if FICO were arbitrary, it would keep ALL negative information for 10 years.

So, I ask, how/why did FICO choose 7 years to keep negative information?  And, I wonder why they keep GOOD information for 10 years after it is closed.

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FICO did not choose this date.  It is a federal law, FCRA.

The 10 years is up to the CRAs.  More for cleaning out files.  Totally up to them as there is no law that says how long good standing accounts can stay.

[AndySoCal]

The Fair Credit Reporting Act defines how ling negative information can stay on a credit report. (FCRA) I just reread Guiness post sorry for the duplicat post

[Lechte]

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@trix_r_4_kids wrote:

I believe it stems from the Bible.

Deuteronomy 15

The Year for Canceling Debts

At the end of every seven years you must cancel debts. 2 This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the Lord’s time for canceling debts has been proclaimed. 3 You may require payment from a foreigner, but you must cancel any debt your fellow Israelite owes you.

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I was thinkin the same thing a few days ago. 

[Imhotrodcrazy]

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@trix_r_4_kids wrote:

I believe it stems from the Bible.

Deuteronomy 15

The Year for Canceling Debts

At the end of every seven years you must cancel debts. 2 This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the Lord’s time for canceling debts has been proclaimed. 3 You may require payment from a foreigner, but you must cancel any debt your fellow Israelite owes you.

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This is the correct answer.

[dominow]

thanks for that info. who would have thought it was something from the hebrew bible?

[RobertEG]

There have been numerous efforts to shorten those exclusion dates.  The FCRA first became effective in 1971, and the only revision to the exclusion dates has been the addition of section 605(c), which clarified the use of DOFD for use in exclusion of collections and charge-offs.

Back in the day, consumers did not even have access to credit reports, their use was not as pervasive, and the financial situation was far different.

Seven years is considered by many consumer advocacy groups to be too long for many items, particularly monthly delinquencies.

Congress apparently does not consider that issue as being high on their priority list.

There would be nothing to prevent FICO from shortening the date it considers adverse items in scoring, but the CRAs are not apt to reduce the showing of adverse information in credit reports they issue below the statutory values, as it would reduce the information in their reports, and thus the potential sales value of their products.

[Anonymous]

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@RobertEG wrote:

There have been numerous efforts to shorten those exclusion dates.  The FCRA first became effective in 1971, and the only revision to the exclusion dates has been the addition of section 605(c), which clarified the use of DOFD for use in exclusion of collections and charge-offs.

Back in the day, consumers did not even have access to credit reports, their use was not as pervasive, and the financial situation was far different.

Seven years is considered by many consumer advocacy groups to be too long for many items, particularly monthly delinquencies.

Congress apparently does not consider that issue as being high on their priority list.

There would be nothing to prevent FICO from shortening the date it considers adverse items in scoring, but the CRAs are not apt to reduce the showing of adverse information in credit reports they issue below the statutory values, as it would reduce the information in their reports, and thus the potential sales value of their products.

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FICO's interest presumably centers around predicting future delinquency, and giving equal weights to a 30-day late that is a month old, or five years old, very likely doesn't make sense, because the former has more predictive value than the latter.