Updated: Jul 28
If you’ve ever checked your credit report, you may have noticed that certain items remain on your report for a period of seven years. This is known as the 7 year credit rule, and it can have a significant impact on your credit score and financial wellbeing.
So, what is the 7 year credit rule? Essentially, it refers to the length of time that certain negative items can remain on your credit report. These items can include late payments, collections, foreclosures, and bankruptcies.
How Does the 7 Year Credit Rule Work?
The 7 year credit rule is based on the Fair Credit Reporting Act (FCRA), a federal law that regulates credit reporting agencies. The FCRA requires credit reporting agencies to remove most negative items from your credit report after seven years.
However, it’s important to note that not all negative items are subject to the 7 year credit rule. For example, bankruptcies can remain on your credit report for up to ten years, and tax liens can remain on your report indefinitely.
Additionally, the seven-year clock starts ticking from the date of the first delinquency, not the date of the account closure. So, if you made a late payment in January 2020 and then closed the account in June 2020, the seven-year period would start from January 2020.
The Impact of the 7 Year Credit Rule on Your Credit Score
The 7 year credit rule can have a significant impact on your credit score. Negative items such as late payments, collections, and foreclosures can cause your score to drop by as much as 100 points.
However, once these items fall off your credit report after seven years, your score may improve if you’ve been making timely payments and managing your credit responsibly.
It’s also important to note that the impact of negative items on your credit score lessens over time. For example, a late payment from five years ago will have less of an impact than a late payment from last month.
The 7 year credit rule is an important factor to consider when managing your credit and financial wellbeing. While negative items can remain on your credit report for a significant period of time, they do eventually fall off, and the impact on your credit score lessens over time.