How Different Types of Late Payments May Impact A Credit Score

Most of us are just one late payment away from a plunging credit score.

Sometimes just being a few days late will damage your record, and being 30 days late most likely will be reported to all three credit bureaus, causing damage.1 Here’s how different types of late payments may affect your credit score.

The Different Types of Late Payments

For creditors, a single late payment signifies broken trust. That’s why payment history is the most heavily weighted factor in calculating credit scores, accounting for about a third of the formula.2

The credit bureaus put late payments into various categories. The more severe the category, the more damaging it is to your score.

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Also considered is how frequently these late payments occur and how recent they are. A late payment from many years ago won’t hurt as much as the one reported today. In fact, a recent late payment is one of the most damaging things of all.3

One late payment may bring down your score considerably, and it could remain on your record for up to seven years.

How to Avoid Late Payments

In today’s busy world it’s almost too easy to forget a payment, now and then, and yet the consequences can be dire. The interest rate on your credit cards could go up dramatically and you may be denied additional credit in the future because your credit score dropped.

One solution is to set up an automatic payment from your checking account to be sure you make your credit card payments on time. Another solution is to call your credit card company before you miss a payment deadline, and let them know your situation.4 Often, they are willing to work with customers.

Tips if You Are Behind on Payments

The best solution is to get your account current as soon as possible.

Ask your creditor if they will remove a late payment mark from your credit report as you bring your account current.5 Many will do so, depending on the situation. Sometimes statements get lost in the mail, or email addresses change, and creditors can be forgiving of these sorts of common misfires.

It’s important to look over your credit report at least once a year to see what is being reported.

If you’ve been dinged by late payments, there is always hope for improvement as long as your account does not go to collection. Once your debt has been written off by the credit card company, there’s nothing to negotiate.

Resources:

1.http://www.creditkarma.com/article/late-payments-affect-credit-score

2. http://www.creditcards.com/credit-card-news/fico-credit-score-payment-history-1270.php

3. http://www.experian.com/blogs/ask-experian/2013/12/04/recent-late-payments-hurt-credit-scores-the-most/

4. http://www.creditcards.com/credit-card-news/simon-credit-score-late-payment-1508.php

5. http://www.transunion.com/article/how-to-remove-late-payment-from-credit-report

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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