Shareable Resources: What Is A "Statute of Limitation" and How Does It Apply To Credit?

According to Investopedia, a Statute of Limitation is defined as:

A statute of limitations is a law that sets the maximum amount of time that parties involved in a dispute have to initiate legal proceedings from the date of an alleged offense, whether civil or criminal. The length of time the statute allows for a victim to bring legal action against the suspected wrong-doer can vary based on the jurisdiction and the nature of the offense.

Essentially, it’s a defined period of time for a person or entity to take legal action. When we discuss a Statute of Limitation and how it applies to credit, it’s related to how long a debt collector has to take legal action against a client, and how long the account can stay on your credit report.

Each state has their own defined Statute of Limitations for debt collection. Find your state here. This is the amount of time a debt collector has to file suit over the unpaid balance. If that time period lapses, the debt collector can no longer file suit to claim against the consumer.

What makes this confusing, is that the Statute of Limitations for how long a collection can stay on credit differs from the state specific SOL for a debt collector to take legal action. A collection can stay on credit for up to 7 years from the Date of Last Activity before having to be removed, but in the state of Utah, a debt collector has up to 6 years to file legal action.

We hope this helps clarify this difficult subject, and are here to answer any questions you may have!