What Happens to Your Credit After 7 Years?

Having a good credit report is important if you want to take out loans, apply for a mortgage, or get low interest rates. Your credit score is determined by major credit bureaus, including Experian®, TransUnion®, and Equifax®, and they independently set your credit score based on information they receive from your lenders.

If you have a bad credit report, due to late or missed payments on loans and debts, it can lead to higher interest rates on mortgages, personal loans, credit cards, and other types of loans. However, because it is unfair to punish people forever because of financial mistakes from long ago, most forms of bad credit fall off your credit report after seven years.

If you’re curious about the seven-year rule as it relates to your credit report, you’ve come to the right place. This article delves into how this rule works, what happens to unpaid debt after seven years, and more. We also look at how to rebuild and monitor your credit and why a positive credit report has major financial advantages.

The 7-Year Rule: What It Means

As we briefly touched on, the seven-year rule refers to the fact that negative items on your credit report will disappear after seven years. You acquire negative information by failing to make monthly payments on credit card debt, student loans, your mortgage, and other types of loans. Other types of negative information include late payments, charge-off accounts, bankruptcies, and more.

Failing to make these payments “discredits” you, leading to a bad credit report because you have a poor track record of paying your debts. When this happens, lenders are more reluctant to loan you money in the future and will charge higher interest rates because of the risks involved.

When Does the 7-Year Period Begin For Negative Items?

Generally speaking, the clock starts ticking for negative items on your credit report immediately after your first missed payment. For instance, let’s say you missed a payment for your credit card in February 2022.

Your credit report will reflect that fact, and your credit score may suffer until February of 2029. At that point, it can essentially be written off of your credit report, even if you continue to miss payments after February 2022.

However, it’s important to note that just because the bad credit falls off your report doesn’t mean the debt is erased. It simply won’t hurt your credit report anymore. You will still owe whatever amount you originally did, plus interest.

Positive Information and Its Duration on Credit Reports

While negative items on your credit report disappear after seven years, positive information stays on your report indefinitely! Positive information includes things like on-time payments, maintaining a good credit utilization ratio, having a positive account history, and more.

The only time that positive information doesn’t stay on your credit report permanently is if you close an account. In that case, positive information typically gets removed from your report 10 years from the time you close the account.

Benefits of a Good Credit Report

In addition to showing responsibility and maturity, having a good credit report positively impacts your finances. You’ll be able to take out loans at lower interest rates than before, leading to less interest and lower monthly payments. You will also have higher credit limits on credit cards and better insurance rates. For these reasons, it’s essential to maintain positive financial behaviors so that you can keep a low credit score.

Additionally, because bad information can disappear from your credit report after seven years, it’s never too late to turn your finances around and improve your score.

Removing Negative Information After Seven Years

The good news about negative information on credit reports is that it typically gets deleted automatically after seven years. You most likely won’t have to call your bank, lender, or credit union and ask them to delete it.

What to Do If Negative Information Isn’t Automatically Deleted

If, however, for some reason, bad info doesn’t automatically fall off your credit report after seven years, here are your options to remedy the problem.

1. File a dispute with the credit bureau reporting your credit – Experian, TransUnion, or Equifax.
2. If that doesn’t work, file a dispute directly with your creditor — the bank, credit card company, or agency who lent you money and recorded your failures to the credit report agency.

Once those negative items are removed from your credit report, you should see your score start rising. This can increase the amount of borrowing options you have and the terms that lenders offer. Therefore, it’s important to be persistent in getting items removed from your credit report if you believe they have surpassed the seven-year statute of limitations.

Rebuilding Credit Post 7 Years

Just because negative info, such as a late payment, a past due balance, or unpaid credit card debt, falls off your credit report, that doesn’t mean it will instantly improve. Instead, you will need to work hard and take initiative to rebuild and improve your credit score. Here are a few great ways to get started.

• Regularly review and actively monitor your credit report to make sure it’s in good standing.
• Pay your monthly bills on time for housing, car leases, student loans, and other loans.
• Pay off credit card debt as quickly as possible.
• Keep your credit utilization ratio below 30%.
• Avoid hard credit inquiries when possible.
• Diversify your credit mix.
• Use credit report monitoring that includes a simulator for actions you can take, such as paying off a credit card, and how those actions can affect your credit score.

You can also consider applying for a secured credit card or credit-builder loan. These types of loans and cards require a small deposit on your part, making them more accessible for people who have bad credit and are trying to rebuild it. By making your monthly payments on these, you’ll soon qualify for other forms of credit cards and loans.

Exceptions to the 7-Year Rule

While seven years is the statute of limitations for when most debt expires, there are exceptions to the rule.

Hard Credit Inquiries

Hard inquiries into your credit, for example, typically fall off your credit report after just two years.

Unpaid Federal Tax Liens

On the longer end of the spectrum, unpaid federal taxes leading to tax liens can stay on your credit report for up to fifteen years or more. Paid tax liens, however, only last for seven years.

Chapter 7 Bankruptcy

Finally, Chapter 7 bankruptcies can stay on your credit report for up to ten years, as opposed to Chapter 13 bankruptcies, which only stay on your credit for seven years.

It’s important to understand if you have any of these outstanding debts or liens because it will affect how long it takes for bad info to fall off your report and how soon you can start rebuilding your credit.

Monitoring Your Credit Report

If you’re serious about keeping a good credit score, it’s important to monitor your credit report closely. If you review your credit report and notice that something doesn’t look right, it’s important to file a dispute with your credit bureau or creditor as quickly as possible. Swift action is the best way to get inaccuracies removed from your credit report.

Bottom Line

If you currently have bad credit because of past mistakes, don’t worry — it won’t last forever. Once they reach the seven-year mark, most bad credit items should fall off your credit report. When that happens, it’s important to take action to rebuild your credit by making wise financial decisions, paying your debts on time, and closely monitoring your credit report. To stay on track, use IdentityIQ credit monitoring services for 24/7 monitoring with real-time notifications of significant score changes and a score simulator.