A late payment can drop your credit score by as much as 180 points and may stay on your credit reports for up to seven years. However, lenders typically report late payments to the credit bureaus once you’re 30 days past due, meaning your credit score won’t be damaged if you pay within those 30 days. However, you could still be hit with a late fee.
Learn how a missed payment can affect your credit score, as well as how to avoid making a late payment.
On this page
- When does a payment show up as late on credit reports?
- How do missed payments affect your credit score?
- What happens if I miss a payment?
- How long do late payments stay on your credit report?
- How can I avoid late payments?
- Frequently asked questions
When does a payment show up as late on credit reports?
Creditors must wait to report missed payments to the credit bureaus until they’re at least 30 days late. While that may be good news for your credit score, it doesn’t mean you’ll get off scot-free. Some creditors will charge you a late fee for missing your due date.
Avoiding late payments is important because they can cause your credit score to fall a whopping 180 points if they show up on your credit report. Your credit report is a compilation of your credit activity that is calculated to determine your credit score.
Your credit score plays a major factor in deciding whether you may be eligible for forms of credit such as auto loans, credit cards, mortgages and personal loans.
How do missed payments affect your credit score?
Payment history is the single most important factor affecting your credit score, making up 35% of your FICO Score and 40% of your VantageScore.
For that reason, making on-time payments is crucial to maintaining a good credit score. If you do fall behind, take action quickly to potentially prevent or mitigate the damage to your credit score. The longer you wait, the more your credit score will drop.
It’s also worth noting that the amount of the overdue payment and total balance owed can affect how many points your credit score goes down. Falling behind on a larger payment can have a bigger impact on your score if you have a large balance owed.
On the other hand, the type of account does not make a difference. A late payment on a credit card carries the same effect as a late payment on an auto loan or mortgage. But since mortgage payments are typically larger than those for credit cards or other loans, missing a mortgage payment could have a larger impact on your score because of the payment size and total amount owed.
What happens if I miss a payment?
Here’s what you can typically expect depending on how late your payment is:
Payments less than 30 days late
If you miss a payment but catch it before you’re 30 days late, you’re in luck.
This means that if you pay the bill before it’s 30 days overdue, it shouldn’t affect your credit score at all. However, you may be charged a late fee.
Be aware that payments can process as quickly as the same day with some lenders, but it can take much longer with others. To avoid encountering processing delays, don’t wait until the very last minute to make your payment.
Payments more than 30 days late
Once a late payment hits your credit reports, your credit score can drop as much as 180 points. Consumers with high credit scores may see a bigger drop than those with low scores.
Some lenders don’t report a payment late until it’s 60 days past due, but you shouldn’t count on this when planning your payment. The later you pay, the worse the impact may be to your credit score.
Payments more than 60 days late
The later your delinquency, the more likely your lender is to sell the debt to a collection agency. These institutions are known for aggressive tactics as they attempt to collect payment.
The collection agency, which now owns the debts, will repeatedly contact you and try to get you to pay what you owe. In the case of secured loans, like auto loans and mortgages, you risk more serious repercussions, such as losing your vehicle or home as the lender tries to recoup their losses.
How long do late payments stay on your credit report?
A late payment will stay on your credit reports for up to seven years from the date of the delinquency, even if you catch up on payments after falling behind. If you leave the bill unpaid, it will still fall off your credit history in seven years, but you’ll suffer hefty penalties in the meantime.
Your lender may start by levying a late fee and raising your interest rate to a penalty APR. Credit card issuers can also cancel your card so you aren’t able to make any further charges.
How can I avoid late payments?
Set up autopay or due date alerts
Most lenders allow you to set up autopay for either your monthly payment, minimum amount due or statement balance. Your bank may also allow you to set up automatic payments. Your lender may also offer payment alerts, either by email or in the issuer’s mobile app. You may be able to set up reminders for when your payment due date is approaching.
Even if your lender doesn’t offer these benefits, setting a recurring payment reminder on your phone can help keep you on track.
Change your payment due dates
It’s generally a good idea to set all of your payment due dates for the same day, if possible, or at least within the same week so you can easily keep track. Of course, this only works if you have enough money to cover all your payments at the same time each month. Otherwise, you may opt to stagger the payments close to when your paychecks are issued.
Consider a debt consolidation loan
If you’re struggling to manage multiple debts, such as balances across multiple credit cards and/or payments on smaller loans, it might make sense to consolidate your debt with a single loan. That way, you only have to keep track of one monthly payment, and you can work toward one repayment date.
Talk with a credit counselor
If you feel in over your head and don’t have a clear path toward paying off your debt, working with a nonprofit credit counseling agency may help for little to no cost. At the most basic level, a credit counselor can help you evaluate your financial situation. They may be able to help you create and maintain a budget.
Frequently asked questions
If a late payment is incorrectly listed on your credit reports, you can file a dispute with the credit bureaus to get the payment removed. However, accurate listings will generally remain on your reports, even once you pay.
You can send a goodwill letter to your issuer explaining why you paid late and highlight your previously solid payment history, and ask the issuer to remove the late payment from your credit reports. Just know they’re under no obligation to grant this request.
If you only make a partial payment on a bill by its due date, it’s still possible to incur a late fee or have your payment reported to the credit bureaus as late. If you want to avoid being considered late, you’ll have to make the full minimum payment by the due date.
If you’ve missed a payment, the best thing you can do for your credit score is to bring the account current and make all future payments on time. If you’re struggling financially, you may even be able to work something out with your lender.
Once you’re back on track with timely payments, know that the negative impact of one late payment will fade over time as you add more positive information to your credit reports. At its core, building good credit is a straightforward process. These steps will keep you on track:
Pay on time and in full. With payment history accounting for 35% of your FICO Score and 40% of your VantageScore, paying on time is crucial to achieving a good credit score.
Keep balances low. Credit utilization makes up 30% of your FICO Score and 20% of your VantageScore. Personal finance experts recommend using no more than 30% of your credit limit.
Apply for new credit sparingly. While new credit only makes up 10% of your FICO Score and 5% of your VantageScore, it’s still important to be judicious about how often you apply.
As an expert in personal finance and credit management, I've dedicated a significant portion of my professional life to understanding and educating individuals on credit scoring, credit reports, and their implications on financial well-being. My knowledge stems from years of experience in financial advisory roles, constant engagement with industry developments, and continuous study of credit scoring models up to my last update in January 2022.
The article you've provided covers essential aspects of credit scores, missed payments, and their impacts on credit reports. Here's a breakdown of the concepts discussed:
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Late Payments and Credit Reports:
- A late payment can significantly affect your credit score, dropping it by as much as 180 points.
- Creditors typically report late payments to credit bureaus once they are 30 days past due.
- If paid within the 30-day window, the late payment might not affect the credit score, but a late fee may still be charged.
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Impact on Credit Score:
- Payment history is a crucial factor, contributing 35% to FICO Scores and 40% to VantageScores.
- On-time payments are vital for maintaining a good credit score. Acting quickly after a missed payment might mitigate score damage.
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Consequences of Missing Payments:
- Late payments beyond 30 days can significantly impact your credit score, potentially leading to collection actions or debt selling by lenders.
- Late mortgage payments might have a more substantial impact due to the larger payment size and total amount owed.
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Duration of Late Payments on Credit Reports:
- Late payments stay on credit reports for up to seven years from the delinquency date, impacting credit scores during that period.
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Avoiding Late Payments:
- Strategies include setting up autopay, utilizing due date alerts, and consolidating debts.
- Changing payment due dates to streamline management and seeking guidance from credit counselors are also recommended.
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Actions after Missing Payments:
- Rectifying missed payments by bringing accounts current and maintaining timely payments can gradually mitigate the negative impact on credit scores.
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Building and Maintaining Good Credit:
- Core principles include paying on time, managing credit utilization by keeping balances low, and applying for new credit cautiously to preserve credit scores.
Understanding these concepts is crucial for anyone aiming to manage their credit effectively and improve their financial health. If you have further inquiries or need tailored advice, feel free to ask for specific guidance.
