How much will one late payment hurt your credit score?

Home Buyers as Financial Creditors

You open your credit card statement and discover that you are late on your payment or you check your credit reports and realise that a late payment is marring your otherwise perfect payment history. So, what happens if you miss a credit card payment? How do late payments affect your credit score?

Late payments and a good credit score go hand in hand. Missing a single payment is dependent on several factors. First, it depends on how many days late your payment is. If you missed your credit card payment by one day, you don’t need to worry. Most lenders do not report missed payments until your credit account is 30-plus days past due. For instance, a credit card payment is due on 15th April and you pay on 25th April. As the payment is late, you would be charged late fees and interest. But in most cases, the creditor would not report this late payment to the credit reporting agencies. If you have been paying on time for a long time, your creditor will let go.

How bad it can get?

Occasional late payments between 30 and 60 days late do not typically cause lasting damage to your score, once they are paid and no longer reported on your credit report as outstanding. But frequent 30 to 60 days late payments will have a negative impact. A missed payment of over 90 days late can damage your credit for up to seven years. You are being viewed as a possible “repeat offender” and a higher risk to creditors if you are 90 days late.

Here’s a summary of how late payments impact your credit score :

30 days late : This record will damage your credit score if it is too often. A single 30-day late payment should not cause lasting damage to your score.

60 days late : One late payment does not cause long-term damage to your credit score. However, if it is often then it would hurt your credit score.

90 days late: This record will hurt your credit score for up to seven years. If you have already missed the payment once, you’re considered more likely to do it again. As a result, your credit scores will drop.

120+ days late: At this point, your debt is usually “charged off” or sold to a third-party collection agency. Both of these occurrences are reported on your credit report and hence, your credit score will reduce further.

Tips to make sure you don’t miss payments: If you want to find ways to help avoid making late payments or missing them altogether, here are a few tips and tricks that you can consider:

Sign up for auto pay: Autopay can be beneficial for those who tend to forget to make the payments by the due date. Autopay simply means that you authorise the credit card issuer or lenders to automatically deduct your monthly payment amount directly from your checking account on the due date.

A downfall to auto pay is that you have to be sure that you have sufficient amount available in your account prior to the date the funds are to be withdrawn. If you don’t have enough funds to cover the payment, then you may have late fees in addition to the missed monthly payment.

Set up reminders: Another way in which you can effectively pay your bills on time is to set up reminders instead of relying on your memory. Calenders or online reminders on a phone are the best ways to keep track of what you have to pay and when it needs to be paid. In addition, you can also ask your creditor to provide you with online alerts regarding your due date for payments.

Weekly payments: Instead of paying on a monthly basis, it’s best to pay weekly on the account. By doing so, you may find it easier to control your overall balances and it will help you pay everything off a bit faster.

Hence, it’s important to make on-time payments going forward. Beyond that, you can focus on paying off debts and only applying for new credit when it’s necessary. This would help you to achieve an excellent credit score and will prevent you from paying high-interest rates and late fee.

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