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How Does One 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 can happen at this point:

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

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 itself. Your creditors might be able to give you an extension and move your payment due date to a later time, thus, buying you a little more time to get your finances in order.

In the event that you’re assessed a late fee (can range anywhere from $15-$35), 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.

How Does One Late Payment Affect Your Credit Score?

The good news is that a late payment that’s under 30 days won’t have a lasting negative effect on 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. Creditors will report back to the bureaus once you’re over 30 days late on your payment.

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 which 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. Your credit score is comprised of a lot of factors including your payment history, credit utilization, length of credit history, the type of mix, and new accounts. However, one thing for certain is that your payment history accounts for 35% of your credit score so this category has the highest weight in determining your score.

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 be on good standing again. You’d be surprised at the type of concessions or programs most creditors have to get you back on track.

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. First and foremost, the card issuer must give you  45 days written notice if your rate is increasing. Also, if your account is also under a year old, they are prohibited from increasing your interest rates except in limited circumstances such as an expiration of promotional 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.

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 should be willing to work with you since the last thing they want is for you to default. Almost every lender has internal hardship programs of some kind, but the programs will differ from lender to lender. However, these programs can lower your interest rates or even give you an extended repayment plan.

If you do enroll in a hardship program, your creditors will most likely 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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