How The '7-Year Rule' Can Make Or Break Your Credit Score

Household debt doesn't seem to be going anywhere. According to the Center for Microeconomic Data, total household debt climbed to $18.39 trillion in Q2 2025, with credit card debt comprising 7% of that amount. When you have credit on hand, it's important to know how to manage it. Even a single late payment can shave off anywhere from 50 to 120 points from your credit score. Beyond just the hit to your rating, your credit report bears the brunt of your mistakes for much longer. The Fair Credit Reporting Act provides that negative entries like late payments and charge-offs stay on your credit report for up to seven years, but no longer than that. This is what's now known as the seven-year rule.

Before we jump into the seven-year rule, you need to understand what affects your FICO score. This number is calculated by various weighted factors. Smaller things like new credit make up 10% of the score, while bigger things like amount owed and payment history are weighted at 30% and 35%, respectively. So, while having high credit card balances and too many new credit applications won't help, missing payments and carrying too much debt will definitely have a bigger impact.

The seven-year rule doesn't really come into play until a payment is really considered late. If you miss a due date by a few days, you're safe, and all you'll likely face is a late fee or an increase in your interest rate. But a due date missed by 30 days gets reported to the credit bureaus, and that's when the rule kicks in. 

If you miss the due date by 180 days, or six months, the card issuer will record a charge-off — writing off the debt as unlikely to be collected. At this point, it's considered serious delinquency, as a charge-off on your credit report tells lenders that it's a big risk to give you money. Not only do you still owe the full amount, but most lenders also tend to pass the account off to a collection agency that could sue you to recover the debt. 

A charge-off notation doesn't go away when you pay the debt, either. The window that opens from the date of the first missed payment remains open for seven years before dropping off your report. Having a single late payment on your credit report may not be a deal breaker, but a charge-off tells lenders that lending you money is a high-risk decision. On the brighter side, the damage to your score is immediate and can be quickly curbed if you take the right steps to fix it.

A charged-off account doesn't automatically mean bad credit for life. The item itself can stay for a while, but its impact on your score fades a lot sooner if you pay off the balance. Because your amounts owed account for 30% of your credit score, reducing this number can significantly improve your rating. Once you've settled the charged-off account, any interest on the balance stops adding up. This won't remove the charge-off entry, but it will reduce the amount of debt you carry and its impact on your credit.

The next step is focusing on the rest of your credit and using it to your advantage. Even just setting up a reminder or autopay to avoid any more missed payments can easily raise your score. Another useful solution is reducing your card balances. A common credit mistake is carrying large balances from month to month. Just remember: Not using credit at all doesn't improve your score — using it smartly does. Carrying no balance means your credit utilization ratio is 0%, and this ratio is part of your amounts owed, which makes up 30% of your score. Keeping this number low is an easy way to boost your score, as it shows you know how to manage your money. Finally, don't apply for new credit unless you really need it. A lender viewing your report for an application triggers a hard inquiry, and too many can lower your score even further. Even though inquiry for new credit takes up just 10%, it's a small detail most people miss.