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When Does a Late Payment Affect Your Credit Score?

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One of the most stressful feelings you can have is realizing that you’ll be making a late credit card payment. No one ever has the intention of paying late on a bill but surprisingly it happens all the time. You can be late because you simply forgot to pay before the due date or you might not have the funds to make the payment. Whatever the reason, you should be prepared to know how to deal with the possible repercussions of a late payment.

Three things may happen at this point:

  1. Late fees
  2. A higher interest rate
  3. A negative mark on your credit report.

How Does One Late Payment Affect Your Credit Score?

Whether you’re one hour late, one day late, or even a few weeks late, you can still get back on good terms with your creditors as long as you pay your minimum amount due.

Keep in mind that if you don’t pay by the due date and there’s still a past due balance at the time your creditors are reporting back to the credit bureaus, you might see a past due balance on your credit report. As mentioned, once you’re caught up with your payments your creditors will report back to the bureaus with a zero past due balance.

In the unfortunate event that you’re more than 30 days late, creditors will report it to the credit bureaus and you will then see a negative remark on your credit report. It’s hard to say exactly how many points your score will go down. Credit scores can be comprised of a lot of factors including your payment history, credit utilization, length of credit history, the type of mix, and new accounts. 

If you’re 30 days late, the last thing you want to do is become 60+ days late. At this point, most lenders could see this as a warning sign if you’re applying for credit in the future. Your best option is to work with your creditors to come up with a solution to ensure that your account is in good standing again. You’d be surprised at the type of concessions or programs most creditors have to get you back on track.

How Long Do Late Payments Stay on my Credit Report?

If you forget or are unable to pay a bill by the due date, a late payment record may show up on your credit report. Once you’re 30 days behind, a creditor can report your late payment to the credit bureaus (Experian, Equifax, and TransUnion). Then, that late payment can remain on your credit reports for up to seven years.

The rules also vary according to when and whether you bring the account current. The creditor won’t typically report you as late to the credit bureaus if you bring the account current before you’re 30 days behind on a payment. However, you may still be charged late fees or interest. 

Will My Interest Rate Increase After One Late Payment?

Thanks to the CARD Act of 2009, there are only certain circumstances where your creditors can increase your interest rates. 

Card issuers can only increase the interest rate on your existing balance if you’re more than 60 days past due. So if you have a credit card balance of $5,000 at 14.99% APR before you became 60 days past due, your creditors cannot change the interest rate on your existing balance. However, any new charges after the $5,000 will be subject to the higher interest rate.

The good news is that your creditor is required to review your account every six months to see if your financial situation has changed. This means that if you’ve shown positive changes, you might be able to get your interest rate lowered.

How to Avoid Late Payments

The best way to avoid late payments is to simply make sure your bills are paid on time, every time. However, this is easier said than done. At the very minimum, set reminders and alerts for yourself to make sure you pay your bills on time.

Set Up Automatic Payments

To help avoid late payments due to human error, it is a good idea to sign up for automatic payments. You can do so either by setting up bill pay from your bank account or by requesting that the creditor pull the money from your account. Either way, you want to make sure that you always have enough money in your account. Insufficient funds could cause a late payment, an overdrawn account, and fees from your creditor and bank.

To avoid accidentally missing a payment and getting charged late fees on your credit card, you could set up autopay for the minimum payment amount. This will be either a fixed amount or a percentage of your total balance. However, if possible, always try to pay off your balance in full each month to avoid interest charges.

Be Proactive and Call Your Creditors

If you know for sure that you’ll be late on a payment, call your credit card company before this happens. You never want to procrastinate and hope things will magically fix themselves. Your creditors might be able to give you an extension, giving you a little more time to get your finances in order.

In the event that you’re assessed a late fee, some creditors might be willing to waive this fee for you depending on your history. If you have a good credit history with your creditors, they may be willing to offer you a one-time courtesy to credit back the late fee.

What Do I Do If I Can’t Make My Payments?

If you’re struggling to make your monthly payments, don’t procrastinate! Having late payments on your credit report can hinder you from getting future financing and working to get your score back up might prove harder than it seems.

The best thing you can do is reach out to your lender to see if there are any internal hardship programs available. Most creditors may be willing to work with you. Almost every lender has internal hardship programs of some kind, but the programs will differ from lender to lender. However, these programs may be able to lower your interest rates or may even provide extended repayment plan options.

If you do enroll in a hardship program, your creditors may close your account. Closing your account might affect your credit score but it’s better than having 30, 60, or even 90+ day negative remarks on your report.

Always be proactive and reach out to your creditors if you sense you might not be able to pay your payments on time.

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