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Late payments can stay on your credit report for up to seven years. However, the impact of late payments will diminish over time, even before that deadline, if you consistently make on-time payments and manage your debt effectively. In this article, we explain the seven-year rule and the steps you can take to rebuild your credit.
Key Takeaways
- Late payments remain on your credit report for seven years, but their negative impact can diminish over time.
- Your credit score can drop significantly if you miss a payment by 30 days, and can plunge more steeply after 60 and then 90 days.
- Derogatory information, such as late payments and delinquent accounts, remains on your credit report for seven years.
- You can repair your credit score by making on-time payments, reducing debt, and building a positive credit history with new accounts.
Negative Effects From Late Payments Diminish Over Time
Your payment history makes up 35% of your FICO score. So, it’s no surprise that late payments can have a significant negative effect on your credit score. Although it tends to vary, the impact is often greater if you have a higher score. That’s because you have more to lose.
In some cases, creditors will not report the payment as late until it is a full 30 days late. If you’re just a few days late, you may be charged a late fee but it likely won’t end up on your credit report. But generally, you may find that:
- 30-day late payments: May drop your score by 100 points or more, depending on your credit history
- 60-day late payments: More severe negative effect than 30 days late
- 90-day late payments: More severe negative effect than 60 days late
Late payments reported to the credit bureau remain on your credit report for seven years. But the full negative effect doesn’t persist the entire time. The negative effect of late payments diminishes over time—if you make regular on-time payments and use credit responsibly, you’ll see your credit score bounce back well before the seven-year mark.
Tip
Check your credit report regularly for errors and report them. You can obtain a free credit report every week from each of the three credit reporting companies by visiting AnnualCreditReport.com, or you can keep tabs on your own and get alerts with a credit monitoring service.
What Is the Seven-Year Rule?
The seven-year rule refers to the length of time that certain types of negative or derogatory information remain on your credit report. Items covered by the seven-year rule include:
- Late payments on any of your credit accounts, such as loans, mortgages, or credit cards
- Any accounts that have gone to collections
- Chapter 13 bankruptcies (Chapter 7 bankruptcies remain on credit reports for 10 years)
Negative information remains on your credit report from the original date that it occurred. For example, if you missed a payment on June 1, 2020, it’ll stay on your credit report until June 1, 2027.
Important
If a late payment was reported incorrectly on your credit report, file a dispute with the credit bureaus and the financial institution. Be sure to include copies of your bank statement, payment confirmation, or canceled check, which show that you made the payment on time.
How to Speed Up the Credit Repair Process
You can rebuild your credit even if you have late payments dragging your credit score down. Managing your credit responsibly, borrowing only what you need, and not overspending can help you avoid financial challenges that can lead to credit issues.
Other ways you can improve your credit include:
- Making on-time payments: If you can’t pay the full debt amount, make at least minimum payments on or before the due date to ensure that on-time payments are shown on your credit report.
- Paying down debt: Reduce your outstanding debt by paying down your balances if possible, especially those with the highest balances. And don’t open any new accounts.
- Keeping accounts open: Don’t close any of your old accounts, even if you don’t use them, since they can help lower your credit utilization ratio and keep your credit score high. The exception here is if you’re paying an annual fee and you no longer want the account, or you’re dealing with problems that would force you to close the account.
- Actively building credit: Consider a credit builder loan to help improve your credit by demonstrating on-time loan payments.
- Become an authorized user: Ask someone with good to excellent credit to add you as an authorized user on one of their accounts. However, be sure to use the account responsibly, otherwise you may hurt their credit.
Rebuilding your credit will take time, but with patience and diligence, you can get back on track. If you need help, consider working with a non-profit credit counseling agency.
The Bottom Line
Late payments can negatively impact your credit history. They remain on your credit report for seven years, although their impact starts to diminish over time. However, if you work on improving your credit using the tips outlined above, you can start rebuilding your score more quickly than you might think.
