One of the most important factors of your credit score is your payment history. This means that if you miss a payment or make it late and it ends up on your credit reports, it could do some real damage to your credit score. For people with higher than average credit scores, the damage is especially rough. Unfortunately, late payments can be inevitable. Rather than shying away from the problem, it’s best to know how late payments affect your finances and what to do if you do find yourself in this situation.
When Do Late Payments End Up On Your Credit Report?
A missed payment or late payment cannot appear on your credit reports until it is at least 30 days past due, according to federal law. If you make a payment after the due date but before 30 days have past, you may incur a late payment fee from your creditors, which could be credit card companies or other lenders. Luckily, the late payment will not appear on your credit report. Your credit score, therefore, will not decrease either.
How Do Late Payments Affect Your Credit Score?
Once 30 days have past, your creditor is able to report your late payment to the credit bureaus. Credit scoring agencies refer to your credit reports at the various credit reporting bureaus to calculate your score.
For FICO Scores, the most popular credit scoring model used by 90% of lenders, your payment history is the single most important thing that determines your credit score. For VantageScore, another popular model, your payment history is considered “extremely influential.”
In some cases, a late payment could cause your credit scores to drop up to 100 points. In general, the higher that your score is to begin with, the more negatively a late payment will affect you. While a late payment will still hurt your score if it’s already low, it will not do quite as much damage in comparison.
Additionally, the later that your payment is, the more negatively it will affect your score. If you’re 30 days late, it will damage your score, but your score will continue to decrease if it is 60 days late, 90 days late, and so on.
How to Know if There Is a Late Payment on Your Credit Report
Under the Fair Credit Reporting Act, you have legal access to one free credit report per year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can request your reports at AnnualCreditReport.com.
When you’re ordering your free copy, you should review your credit reports all at once to compare the information. This will allow you to find any discrepancies between agencies and ensure your credit scores are accurate.
How Long Do Late Payments Stay on Your Credit Report
A late payment stays on your credit report and can affect your credit score for up to seven years from the original delinquency date. Although they can stay on your report for up to seven years, credit scores are most heavily impacted by recent occurrences. If you miss a payment but continue to make consistent, on-time payments going forward, the impact of the late payment on your credit scores will diminish over time.
Do Partial Payments Help?
Unfortunately, partial payments will not keep late payments off of your credit report. You must make at least the minimum payment to avoid having your creditor send your information to the credit bureaus or a collections agency.
What to Do if You Miss a Payment
You’ve missed a payment. Take a breath. It is not the end of the world, but it is important that you take action swiftly to address the late payment and avoid serious damage to your credit score.
Within 30 days of the due date
If the late payment is not yet 30 days overdue, get it paid as soon as possible. The minimum payment will do the trick, but more is better if possible. Your creditor may have charged you a late fee, which you can negotiate a refund for, but the late payment has not yet hurt your credit score.
More than 30 days after the due date
If the late payment is overdue more than 30 days, you’ll have a little more damage control to do. Your top priority should be settling your late payment as quickly as possible. You don’t want your creditor to report your late payment again if another billing cycle lapses.
Once the dust has settled and you’ve brought your account current, you can contact your creditor and politely ask them to remove the negative mark from your credit report. A goodwill letter usually only works if you have a history of on-time payments and responsible credit usage with the lender, and even then you may not be able to get the mark removed.
What to Do if There’s an Error on Your Credit Report
If you find errors on your credit reports, it’s important that you contact the appropriate credit bureau right away. Unfortunately, some errors may not be fixable, but there are a few steps you can take to maximize the chances that you will get it remedied.
First, contact the credit bureau directly with your concerns. You will need to provide them with proof of the information in question. For instance, if your credit report shows that you have several late payments on a credit card, you will need proof that you made these payments on time. It’s wise to keep a folder, whether a hard copy or digital, of your on-time payments in case this issue ever arises.
If you don’t have proof, then it’s best to contact the creditor that reported this information and ask them for assistance with your claim.
How to Avoid Late Payments
With a little planning, you can avoid late payments. Here are some strategies that can help:
If you cannot pay your bills immediately after receiving your statement, set up manual or digital reminders so you can remember to pay your bills on time. By setting up reminders, you can avoid costly penalties, interruptions to your service, poor marks on your credit report, and significant damage to your credit score.
Organize your bill-paying space
Half the battle with bill pay is often just locating the bill — whether you’ve tucked it into your junk drawer (everyone’s got one) or have to sift through your email. Organize your desk and paper bills if you pay bills manually, or organize your computer folders and email inbox if you prefer to pay a bill online.
If you have a tidy space where it’s easy to find what you need, it’s likely that you’ll feel more compelled to sit down and pay bills when the time comes, and you’ll be less likely to misplace or forget a payment.
Make your due dates work for you
There are a couple different ways that you can organize your due dates, and each come with their own set of benefits.
You can stagger your bills throughout the month so a chunk of change is not coming out of your account all at once. This method helps with money management. Not all billers offer this service, but many do. You might prefer to have two different due dates that align with your paycheck schedule and allow you to space out your major expenses.
On the other hand, it might help to have all of your bills come out at the beginning or end of each month. You could set a bill-paying date and schedule all of your bills to be paid on that day. This works especially well if you do not want to dedicate time and energy several times a month to sitting down and paying bills.
In either case, it’s important to set reminders so your bill-paying dates do not come and go quietly. You should keep arrival and processing times in mind when paying your bills. This is especially important for payment methods that are not immediately received by your biller, such as if you pay your bills with cash by mail.
If you have a credit card payment, you should keep a couple extra things in mind. Be aware of your credit card’s grace period — this is the time between the end of your billing cycle and the bill’s due date. During this time, you will not accrue interest. Try to pay off your credit card balance in full during this time to avoid carrying a balance over to the next month. You may also want to dedicate more than one day per month to paying down your credit card balance. This can help you maintain a lower credit utilization, which helps your credit score.
Decide if automatic payments are right for you
Autopay can make bill pay cheaper, more convenient, and help you avoid late payments. However, it also gives you less control over what’s coming out of your account (and when), and it can lead to just as many bank fees.
Automatic payments do not work for everyone, nor are they suitable for every type of bill. Some bills that you should consider paying manually include utility bills, phone bills, and subscription services. By paying for these types of bills manually, you can check for inaccuracies, identify dangerous or costly issues within your home, and reconsider whether you need the service or product at all.
Prepare your bank account
Whether you are paying by debit card, credit card, ACH, cash, or check, ensure that there are enough funds in your account or that you are not nearing your credit limit when paying a bill. The last thing you want is to make the payment and immediately receive push back due to insufficient funds. This is a common reason for late payments on bills and credit accounts.