How a Missed or Late Payment Affects Your Credit Score
Now that you’ve missed or been late on a payment, you’re wondering what result it will have on your credit score. Unfortunately, you may see a significant drop in your credit score if your payment is more than 30 days past due. But, there are actionable steps you can take to potentially lessen (or remove) the negative effects of your late payment and prevent future missed or late payments.
In this guide we will cover:
How does one late payment affect your credit score?
Payment history is the single most important factor when it comes to your credit score, making up 35% of your score. As a result, it’s very important to make on-time payments so you maintain a good credit score and avoid the negative effects of a late payment.
1-29 days late
Missing one payment won’t necessarily kill your score — it depends how late that payment is. You’ll suffer the most damage if you make a payment more than 30 days after your due date.
“Credit reporting standards dictate that an account, of any variety, has to be a full 30 days past the due date before it can be reported to the credit bureaus,” said credit expert John Ulzheimer, formerly of FICO and Equifax.
That means you have a small window of time to pay off a late payment, specifically during days 1 through 29 after the payment due date. Pay off the late payment within that timeframe so you can avoid the possible negative effects towards your credit score.
30+ days late
Once a late payment hits your credit report, you can expect a credit drop of 60 to 110 points for a 30-day delinquency, according to FICO data. Someone with a higher credit score would actually experience a larger drop than someone with a lower credit score.
The reason consumers with higher scores experience a larger drop is because they often have no delinquencies on their record.
“The first delinquency impacts [their] FICO Score more than a different consumer who might have multiple delinquencies on [their] credit history,” Tommy Lee, principal scientist at FICO told LendingTree.
Here’s an example of the effect a 30-day delinquency has on two different consumers:
|Consumer 1||Consumer 2|
|Current FICO Score||680||780|
|FICO Score after a 30-day delinquency||620 – 600||690 – 670|
|Total FICO Score drop||60-90||90-110|
*Note this study was done on selected consumer profiles, and there are a wide range of profiles so results may vary.
60+ days late
The later your payment, the more severe the impact on your credit score. Late payments are listed on your credit report as 30-, 60-, 90-, 120- and 150-days late. After 150 days, the lender may send your payment to collections or charge off (when a lender writes your payment off as a loss). The later your delinquency, the more your credit score will decrease.
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Does the size of a late payment matter?
You may be wondering if a late payment of $200 affects your credit score more than a late payment of $2,000 — the answer is yes. Ulzheimer explained credit scoring systems take two primary metrics into consideration on delinquent accounts: the past due amount and the actual balance of the delinquent account.
“The larger the past due amount and balance on the delinquent account the more problematic for your credit score,” said Ulzheimer.
That means if two people have delinquent accounts with a $1,000 past due amount but Consumer 1 has a $15,000 balance and Consumer 2 has a $5,000 balance, Consumer 1 would see a more significant negative effect on their credit score.
Does the type of late payment you have make a difference?
“A late payment is a late payment regardless of the type of account,” said Ulzheimer. That means a late payment on a credit card carries the same effect as a late payment from an auto loan or mortgage. However, Ulzheimer pointed out that typically balances on a mortgage may be higher than those on other loans or credit cards, and as a result may cause more damage to your credit score — but that’s due to the size of your late payment, not the type.
Do lenders look at your late payment?
Since payment history is such a large factor in your credit score, lenders take this into consideration when deciding your eligibility for credit products. A frequent history of late payments doesn’t paint you as a strong candidate for loans. But, if you only have one late payment on your credit report and you pay it before it gets too delinquent while also avoiding future late payments, lenders may not weigh that late payment too heavily. It may be considered a small blip in your credit history, as long as you make on-time payments going forward.
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What are some other penalties for a late payment?
Beyond affecting your credit score, late payments can cause you to incur fees and lose out on promotional offers. Here are some penalties for making a late payment:
Most often you will be hit with a late fee when you pay late. Your lender may waive your first late fee, so don’t be afraid to call and ask them to give you a break.
Late payments may cause your interest rate to spike significantly higher than what it was prior to your late payment. And, while penalty APRs may be able to be undone by meeting requirements like making two consecutive payments on time, they can also be permanent. It’s up to the lender to decide whether the penalty APR stays in effect or if there are requirements you can meet to get your regular purchase APR back.
Cancellation of 0% intro periods
If you’re currently taking advantage of a 0% intro period, you may lose your offer if you pay late.
How long do late payments stay on your credit report?
Late payments stay on your credit report for seven years from the original delinquency date. That means if you have a late payment from May 2018, it will be on your account until May 2025. However, the further in the past a late payment is on your account, the less it will affect your credit score. This is similar to how long other negative information remains on your credit report.
Can late payments be removed from your credit report?
Typically, accurate late payments won’t be removed from your credit report, but that doesn’t mean it isn’t possible. You can contact your lender and try to negotiate terms to remove the late payment from your account. Proposing you will provide full payment or come to a partial settlement may increase your chances of having the late payment removed from your account. If a lender agrees to remove your late payment, make sure you receive a confirmation statement in writing.
If there’s an inaccurate late payment on your account, you can dispute it with the credit bureaus — Equifax, Experian, and TransUnion. Note, you’ll have to dispute it with each bureau individually and follow up to ensure the incorrect information has been removed. You should receive a reply from the bureaus within 30 to 45 days. Also, make sure you have confirmation that the bureaus removed your late payment in writing.
— Read our guide on how to dispute credit report errors.
What to do if you’ve missed a payment
If you’ve missed a payment, there are a few steps you can take:
Pay it off as soon as possible.
This can help you potentially avoid the payment hitting your credit report or becoming more delinquent.
Call your lender and try to negotiate your payment.
Some lenders may be willing to work with you to reach a settlement if you discuss your situation and what lead you to miss a payment. If it was due to an emergency or personal situation, lenders may work with you. This may result in the lender working out a payment plan, accepting a lower payment, or removing the late payment from your credit report.
Don’t miss another payment.
Missing more than one payment can further hurt your score. Make it a point to stay current on all of your other accounts so positive payment history is reported to the credit bureaus.
What to do if you can’t make payments
If you’re struggling to make payments towards your balance, you’re not out of luck. You have several options that can provide short-term solutions to your payment problems. If you choose one of the options below, make sure you couple it with responsible credit behavior so you can rid yourself of debt and move forward with on-time payments.
Negotiate your bill.
If you know in advance that you won’t be able to make a few payments, you can speak to your lender and they may work with you and come up with a payment plan. Keep in mind not all bills are negotiable, but you may be able to negotiate your credit card or medical bills.
Consolidate with a personal loan.
A personal loan can be a good option for debt consolidation. Personal loans are issued in fixed sums at fixed rates and repaid over a fixed period of time. Depending on the lender and your credit, they may have lower rates than other options like cash advances or credit cards. They can help you pay off past due bills or make upcoming payments, but beware that you must completely pay back your personal loan before you’re debt free.
Open a 0% intro APR card.
Cards with 0% intro APR periods can help you get out of existing debt and can give you more time to pay off new purchases without charging interest. There are 0% intro APR cards for balance transfers and/or new purchases. During the 0% intro period, you won’t be charged interest on your balance — but if you continue to carry a balance once the intro period ends, you may be retroactively charged all the interest you accrued (also known as deferred interest).
Tips to make sure you never miss a payment again
Set up autopay when available
Most credit cards allow you to set up autopay for any amount you want such as your minimum payment or statement balance. And, you can also set up autopay for various bills such as an internet subscription with Optimum, which will automatically deduct the amount of your monthly bill from your bank account on the payment due date of each month. This is a great way to prevent missed payments.
Set up payment reminders
You can set up a variety of payment reminders for the various bills you have like cable, credit card, electric and more that can remind you when you have a statement available when your payment is due in a set amount of days, when your payment posts and more. Note: options may vary by lender.
Change your payment due dates
If your payment due dates are spread out over the month, it may increase your chances of missing a payment. It’s generally a good idea to make your payment due dates the same day if possible, or within the same week so you can easily keep track of due dates.
The reason you missed a payment may be because you overspent and don’t have enough money to cover your payment. Budgeting apps can be a great way to get your finances in order and can provide you with a better picture of where your money goes and how much you can afford to spend.
Set up an emergency fund
Unexpected expenses may arise in any given month, potentially resulting in the inability to make a payment. If you set up an emergency fund, you can have a safety net that may be able to cover your payment so you avoid late fees and harm to your credit score.