Does a late payment hurt my credit score?
If you are serious about your credit score, you need to pay your bills on time. One late payment can have a devastating effect on your credit score. Here’s what you need to know about late payments and your credit score, and what you can do to protect yourself.
How late payments affect credit scores
Your payment history is the most important factor in determining your credit score, so it is imperative that you pay your bills on time whenever possible. If you make a late payment, there are three factors that determine how much it will affect your credit score.
Your credit rating and credit history
How long has it been since the late payment
How serious was the late payment
According to FICO Credit Damage Data, a recent late payment can lead to a drop of 180 points on a FICO FICO,
Goal, depending on your credit history and the severity of the late payment.
Your credit history and late payments
The impact of a missed payment on your credit score varies widely depending on your situation. The better your credit, the more you might feel the sting of late payment. In fact, that 180 point drop mentioned above is more likely to happen to someone with excellent credit who is 90 days behind on a payment. Since people with good and excellent credit do not have a history of risky behavior, an error sends a red flag that can lower their score more dramatically.
People with shorter credit histories are also likely to see a dramatic drop in their score after a late payment. Because there is less information available about your financial behavior, late payment is a bad sign. On the flip side, people with lower credit scores already have a history of risky behavior, so one more late payment won’t lower their score as much.
How weather affects credit
The more recent a late payment, the more seriously it will affect your credit score. A missed payment stay on your credit report up to seven years from the date it occurred. The overall impact of late payment decreases over time and disappears completely when the missed payment disappears from your report.
Your score won’t necessarily jump 100 points just because a late payment gets old or gets deleted. While a late payment may have caused your score to drop quite a bit, the impact of that late payment changes over time. How your score increases when a late payment is deleted depends on a number of factors. So you’ll want to continue to practice smart financial habits, like making payments on time and keeping your use of credit moo.
How gravity affects credit
If you’ve missed your credit card payment by a day, you probably don’t need to worry. In most cases, lenders and creditors have grace periods that can range from a few days to 10 days. Grace periods are intended to account for minor errors and delays in sending or posting payments. If your payment arrives within this time frame, the lender may not consider it late.
Most lenders don’t report missed payments until your account is 30 days past due. After 90 days, the effect on your credit score will be even more drastic.
Be sure to read the fine print on your account agreement, however, to find out if you have a grace period. And avoid making a habit of relying on the grace period. If you’re used to paying your bill five days after the actual due date, you might miss the grace period if you experience a personal emergency. Also, keep in mind that interest and fees may still apply during the grace period, even if your payment is not reported as late to the credit bureaus.
How to protect your credit history from the impact of late payments
Payment history is a big part of your credit score. It represents about 35% of your score, or more than a third. Take steps to make sure late payments don’t affect your score when they don’t need to. Here are three tips to achieve this.
1. Check your credit score and report regularly
Frequently check your credit reports to make sure late payments are not being misreported. A simple clerical error is enough to lower your score. If you see inaccurate information on your credit reports, you can and should dispute it and request a check.
You can get a free credit report each year from each of the three credit bureaus, Experian EXPGY,
and TransUnion TRU,
Due to the COVID-19 crisis, you can get your free credit report once a week until April 2021. When you request your credit report from AnnualCreditReport.com or individual credit bureaus, you will not see your credit score.
2. Use tools to help you make timely payments
Avoid late payments by using resources that ensure you make payments on time every month.
- Sign up for automatic payments. Your lender may offer this option, allowing you to enter a credit or debit card or checking account and withdraw payments from that account each month. The advantage is that you can settle and forget about your payments without ever worrying about them being late. The downside is that you have less flexibility in when you pay each month, and you have to make sure you keep a balance in your account to cover the charges.
- Use apps or phone alarms. Don’t forget to make payments with app notifications that let you know the payment date is coming soon. Many credit card companies and other lenders offer options to receive these notifications directly from them.
- Make smaller, more frequent payments. If you’re struggling to save enough to cover a big bill each month, pay a portion of what’s owed each week. This can help you simplify your budget, although you need to make sure you aren’t charged a convenience fee or other amount every time you make a payment.
3. Request cancellation of one-off late payments
Life is happening, and creditors are aware of it. So if you find yourself making a one-time late payment, contact your creditor.
Apologize for the late payment, let them know this is not a normal event for you, and state your previously impeccable payment history. Ask the creditor to waive late fees and interest charges as a courtesy and not report the late payment to the credit bureaus. It’s a tool you should use sparingly, but creditors can oblige you if you normally pay on time.
This article originally appeared on Credit.com.