Is a Late Payment Going to Hurt my Credit Score?

Late payments can have a highly adverse impact on your credit score, but there is nuance in how creditors report them to agencies. Being well-informed on how late payments are handled can guide you on how to effectively manage them without risking your rating.  

How "late payments" are defined

Generally, creditors only report a late payment to the three bureaus if they are at least 30 days past due. Although your credit provider may charge you a late fee if it is even late by a single day, if you pay it within that 30-day window it will not appear on your credit report. If the payment is not made at all, then there are escalating grades for every 30 days after (60, 90, 120, and so on.) Each following category results in a larger and larger hit to your credit score, and even if you do make the payment, the mark will remain on your history of payments with a comment such as "was 60 days late" or "was 90 days late three times". Although creditors can continue to keep reporting unreceived payments as late as often as they wish, by the 120-day mark they are generally considering collections or charge-off activity.

The effect on your score

Since credit scores are comprised of many factors, it's difficult to give a firm notion of how much a single late payment will affect your score. However, FICO has published that a higher score is more impacted by a late payment, with one 30-day late dropping an already high score by almost 80 points, and a low score by as much as 30. Knowing how late payments affect your score will equip you for how to manage them once they occur. The primary factors are as follows:

  • The number of late payments spread over all of your accounts;

  • The severity of those late payments;

  • The total payment history over all of your accounts, and

  • The recency of the late payments, as they affect your score less and less the further they are in the past.

How to avoid late payments

You do have some options for wiggle room for late payments to prevent them from affecting your score. The knowledge that they are not reported until after 30 days can be very useful, as it gives you time to catch up on payments without stressing, even if you have to pay a late fee in the process. You can also consult with your creditors to move your due date to a later part of the month, which they may be willing to do the first time you ask. You could also ask them for a temporary forbearance to give you time to get caught up. When speaking to the credit representative, you may also want to clarify whether these actions will result in a late payment on your report if it goes past the 30-day window. 

Conclusion

Life can bring unexpected challenges, but maintaining a good credit score means you will pay far less in interest the next time you need to make a big purchase. Do you have any questions on how to maintain better credit? Please feel free to reach out to NationalFCG for assistance.

BJC