While there are many factors that affect your credit credit score, nothing has a bigger impact than your payment history. In fact, your payment history makes up about 35 percent of what the bureaus take into consideration when determining your score (according to FICO models).
Proving that you can make pay your obligations on time is what will get you better interest rates for a dream house or a dream car. People often come to me, wondering what they can do to get an excellent credit score. The truth is that the only surefire way is time and commitment. I’ll share some ways to improve your credit score by removing negative payment history in future articles, but for now let’s focus on what happens when you fail to make a payment on time. Adversity can strike anyone and mistakes happen,
So what the overall effect of a missed payment?
Generally speaking, a late payment (also known as a delinquency) can lower your credit score by 100 points or more. This is especially true if you had a higher credit score (600+), to begin with. Those with larger scores can expect an even bigger drop in their credit ranking than those that have lower scores. This means that remembering your payment obligations and paying on time is extremely important to maintain a positive credit rating. That score you spent so much time building can drop in an instant.
When tragedy strikes, even the most diligent cardholder can miss a payment. Luckily, there is a grace period before this slip-up can really mess up your score.
How Late Does a Payment Have to Be to Affect Your Credit?
Late payments can’t legally be reported to the credit bureau until they’re 30 days past due, which means that if you do miss a payment, you have a month to get caught up without lowering your credit score. So if the choice is between food or electricity and paying a credit card, you should take care of your needs first and then try to get caught up within the month. If you can’t pay within 30 days, you should keep in mind that the longer you wait, the more your late payment will hurt your score.
However, just because your credit score won’t be impact if paid within 30 days of the due date, that doesn’t mean that there won’t be other consequences of missing the due date and paying within the grace period. Late fees can begin immediately after the due date and can continue to rise until you make a payment. It might be worth calling your credit card company though to try and talk your way out of those extra fees. Oftentimes, they’ll waive such fees if you have established a history of on-time payments.
How Long Does a Late Payment Stay On Your Credit Report?
A late payment will stay on your credit report for seven years. This applies to each individual late payment, no matter how many of them you make. The seven-year period doesn’t start over at any point, so you don’t have to worry about accidental late payments adding time to previous marks.
If you do make a late payment, it’s not the end of the world. The negative impact decreases over time, even if it remains on your report. And at the seven-year mark, the late payment will no longer be seen at all, when creditors pull your report. This allows you to recover over time and eventually start with a clean bill of health. If you are looking to get negative marks taken off before the seven year time frame, there are a few options available to make that happen. I’ll discuss some of those in my next article.
About The Author
Philip Shockey is a credit repair expert working to help people improve their credit scores. Whether from fraud, identity theft, or simple oversight, Phillip works to restore his clients credit worthiness. He does this by removing negative information from credit reports and providing credit education to help his clients regain positive standing.