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Credit-card debt was canceled, but credit record is unforgiving


I'm trying to help a friend who recently was turned down for a loan from a local bank. When we got her credit report from Experian, it showed an unpaid balance of $2,600 on one of her credit cards. She showed me a 1099C tax form, issued by the credit card company in 1995, showing that the entire amount had been canceled. Why is it still showing up on her credit report? This gross error cost her a much-needed loan. We've asked the credit bureau to investigate, but the telephone representative said it would take 30 days.

You're wasting Experian's time, as well as your own. A canceled debt does not disappear from your credit report; in fact, it stays as one of the blackest marks you can get, short of bankruptcy.

The credit-card company issued the 1099C because it had given up on ever collecting the money from your friend.

By sharing the information with the credit bureau, it was warning other companies that she's not a good risk because she doesn't repay her debts. In other words, the gross error was made by your friend, not the credit bureau.

Of course, the impact of her misdeed will fade over time, especially if she has paid her bills promptly since then.

If the debt remains on her credit report after 2001, she would have legitimate cause to ask Experian to expunge the canceled debt from her record.

Most negative information must be removed after seven years (or 10 years in the case of a bankruptcy).

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