Do late payments affect a credit score? You bet.
Delinquencies, or accounts that have missed payments for more than 30 days, stay on your credit report for at least seven years. And, one CNBC study showed that the reason why people end up with poor credit after missing payments isn’t so much related to the fact that they missed the payment. Rather, it’s the fact that they get caught in a cycle.
When it comes to the various factors that affect your credit score, your payment history is the biggest factor. Every 30 days, creditors report payment history to the credit bureaus. This means it’s very important to ensure you stay on top of your payments. Or, that you contact your lender to talk about lowering payments if needed.
But, just how much does one late payment affect your credit score? We’ve got some answers for you.
Why Do Late Payments Lower Your Credit Score?
In short, a credit score is a way to show lenders and third parties that you’re financially responsible. You’re demonstrating that you’re financially responsible. They want to see that you can manage various different lines of credit. And, they want to see that you’re also able to remember to make payments on time.
When you miss a payment, it shows that you aren’t responsible enough to manage your credit. Or, that you don’t have the means to pay back what you owe. Either way, this shows creditors that you shouldn’t be trusted with more cash. In turn, they lower your credit score to indicate that risk.
How Much Does a Late Payment Affect Your Credit Score?
Having one account that’s over 30 days past due can lower your credit score by up to 100 points. According to federal law, agencies aren’t allowed to report a credit account past-due until after the 30-day mark. So, this means that if you simply forget to make the payment on time, you have 30 days to pay it off before it’s marked as delinquent.
A missed payment that’s over 30 days past due will be reported and the negative mark will stay on your credit report for seven years. However, the effect it has on your credit score will diminish over time.
If you were unable to make payments at the time or simply fell behind and completely forgot, it’s worth calling the creditor, explaining your oversight, and asking if they’ll remove the mark. Assuming it’s never happened before and you’ve previously been pretty responsible with payments, they might remove it.
Are you to make the payment due to your current financial situation? Or, have you had a financial emergency that’s come up? Simply contact the creditor and ask about your options. They’ll likely be willing to work with you to either lower your payments or walk you through other options while giving you the resources you need to make it through the financial crisis.
What to Do When You Miss Payments
We all forget; it’s normal! If you’ve missed a payment, pay up as soon as possible. Or, as soon as you know that you’re going to be unable to make a payment, contact the creditor and ask for an extension or for them to lower your payments. Avoid letting the debt go into collections as that’s worse for your credit score than a missed payment.
If you’re unable to get the mark removed from your credit report, there are other ways you can improve your credit score. Try to focus on the other factors that affect your credit score, such as amount owed, the length of your credit history, and your credit mix. If you can, make a special effort to pay off more than your minimum monthly payments, ensure that your credit utilization rate low, and set up auto-payments so that you don’t miss another payment again.
How to Check Your Credit Score
Not sure how to check your credit score to see if a missed payment has affected it? Download Float. It’s the first app that allows you to not only access an up-to-date credit score but also to share it with others in your circle.
Whether you want to share your full score or a cute emoji indicating a credit range, it’s a great additional resource to use to help you stay accountable and vigilant. Then, when you make on-time payments and see your credit score go up, you can share in that win with your partner, friends, or family.
Download Float today to get started.