A Late Payment Decreased Your Credit Score—Now What?

By Brooke Vaughan // August 3, 2020

People often assume that when it comes to bank and credit card fees, there’s no talking your way out of it. If the bank charges you, it’s a done deal. And credit scores? Forget about it—there are official bureaus that figure those numbers. So there’s no use in arguing with the banks and bureaus, right? They must be right…right? Wrong. There’s always room for negotiation. Cushion, for instance, sees a 50% success rate on all late fee negotiations, meaning for every $100 we fight on behalf of our customers, we get on average $50 back. It’s always in your best interest to stand up for your finances. 

A CreditCards.com sample survey found that late payment fees are the most common credit card–associated fee in the U.S. With late payments come a great deal of consequences—including potential damage to your credit score. As rules of thumb: The later your payment is and the higher your credit score is, the more damage a late payment will cause. The average FICO score in the third quarter of 2019 was 706, considered “good” by the scoring service’s standards. With this score, you could expect to see a drop of more than 50 points after a late payment. 

That’s, of course, if you don’t take action before the situation gets out of hand. Here are the steps you should take immediately when you realize your credit score has dropped due to a late payment, and three other things you can do to offset the damage.

What’s the first thing you should do if your score has taken a hit?

First, determine whether the drop in score is legitimate: Was it a mistake on the part of your credit card issuer or the credit reporting bureau, or did you really miss a payment? 

If your issuer made a mistake and falsely reported a late payment, your job will be fairly simple. You should dispute the inaccuracy with your credit card issuer as quickly as possible before it does more damage to your score. You’ll need to prove that you made at least the minimum payment by the due date, so be prepared with any necessary documentation. You may also have to dispute the inaccurate information with the credit reporting agencies—Equifax, Experian, and TransUnion. 

If you missed a payment, the dispute may not be that simple, but it’s still worth the effort. Credit card issuers like to keep their customers happy, so chances are they will be willing to work with you. Contact your issuer as soon as possible (or go the stress-free route and let Cushion handle your fee negotiation automatically). Be prepared with your reason for the late payment and plans to settle your debt, whether you’ll be paying in full right then or have a proposed payment schedule. 

You can ask them to remove the late fee, but if a higher credit score is what you’re looking for, you’ll have to ask your issuer to remove the negative mark on your credit report. Ultimately, the decision to waive the fee or remove the mark is up to the issuer; however, making a payment on the delinquency will not further hurt your score—it will most likely help it. Paying, at least in part, can help in a couple ways: 

  1. Your score will rise if you continuously make minimum payments. Credit scores track patterns and are most heavily affected by recent payments, so making on-time payments will diminish the effects of the late payment. 
  2. Future credit card issuers, loan officers, and other lenders will recognize that you’ve made a concerted effort to repay your debt, which could help you secure a loan, credit card, mortgage, or job despite having a negative mark due to a late payment.


After negotiating with an issuer but before paying off your debt, get the settlement in writing, whether the issuer has agreed to lessen your balance owed, remove the negative mark from your credit report, or otherwise. And remember: Negative marks fall off credit reports seven years after the delinquency. So if you missed a payment in May 2020, you can expect the mark to be completely eliminated from your score by May 2027. 

If you’re not able to call the issuer, you can also send a goodwill letter detailing the reason for your missed payment and your plan to pay off the debt; however, you could wait weeks for a response this way.

So you’ve contacted your issuer—what’s next?

It’s time to offset the damage. 

  • Continue making on-time minimum payments. Don’t worry if you can’t pay the bill off in full; just the minimum payment will keep you from getting another late fee and a further drop in your credit score. 
  • Look for other discrepancies. Keep an eye out for what the scoring services are factoring into your score. While it may seem like a long shot, there’s a chance you could catch errors worthy of a dispute. Common errors people find in their credit reports, according to the Consumer Financial Protection Bureau, include incorrect accounts as a result of identity theft, same debts listed more than once, and accounts with incorrect credit limits, among many others. 
  • Check your credit utilization. Credit utilization is how much of your total credit is in use at any time. Experian reports that the recommended total credit utilization rate is less than 30%. For example, if you have a $1,000 credit limit on your card, you should keep your balance below $300 at all times. If you’re above 30% credit utilization, find ways to cut down on credit use, such as paying off your credit card twice per month rather than once, asking for a higher credit limit, or leaving a card open after you’ve paid off its debt.


If you’ve convinced your issuer to remove the negative mark and your score is somewhere closer to normal, consider these damage-control tips freebies. Even if your score isn’t suffering, searching for discrepancies and reassessing your credit utilization are key ways to boost an already-ideal credit score. 

 

 

Cushion negotiates bank and credit card fees so you waste less money, save more, and live a financially healthier life. It’s your money after all, and we’re here to help safeguard it. Since Cushion’s launch in 2018, our customers have received more than $3 million in refunds. We leverage artificial intelligence, advanced fee-detection technology, and bank-level encryption to put money back into your account—quickly, efficiently, and securely. More than that, we equip you with the tools for success by providing the most up-to-date data and insights in banking, news, and financial wellness.