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If you’ve missed or been late on a credit card payment, you may be worried just how much your credit score will plummet. The effect a late payment has on credit scores varies based on several factors, such as how many days it’s past due, whether you’ve had multiple late payments in the recent past and how good your credit score is at the time of the late payment.
We’ll review the potential setbacks of late payments and provide tips on how to make sure you never miss a payment again.
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How does a late payment affect your credit score?
Payment history is the most important factor of your credit score, accounting for 35%. That’s why it’s important to always pay on time. But there are times when life just gets in the way and you either forget or just can’t make a payment on time.
Timing is key when it comes to missed payments. If you missed a credit card payment by a few days, it’s not the end of the world. It shouldn’t appear on your credit report if you make the payment within 29 days after the payment due date. A payment is considered late after it’s 30 days past due.
After 30 days, you should expect to see the late payment appear on your credit report. A 30-day delinquency can seriously hurt your credit score, causing a drop of 60 to 110 points, according to FICO data.
“The impact to the FICO® Score when missing a payment is highly dependent on the starting score,” said Tommy Lee, principal scientist at FICO.
Someone who has a low credit score may already have negative information on their credit report, and their credit score could reflect their past risky behavior. A late payment won’t be as significant compared to someone who has a high credit score and no prior history of late payments, Lee said.
The longer your payment is past due, the greater the negative impact on your credit score. Late payments are listed as 30, 60, 90, 120 and 150 days late. After 150 days, they may be sent to collections or charged off (when a lender writes your payment off as a loss due to severe delinquency). Having a late payment sent to collections or charged off can do lasting damage to your credit. Make sure you settle late payments as soon as possible and keep your account current.
How long does a late payment stay on my credit report?
Late payments remain on your credit report for up to seven years from the original delinquency date — for example, a late payment in January 2019 will stay on your credit report until January 2026. However, the impact diminishes over time with good payment behavior going forward..
What are the penalties of a late payment?
If you pay late, odds are you’ll incur some sort of penalty from the card issuer, whether it’s a fee or increased APR. Here are some setbacks you may incur:
- Late fee. Perhaps the most likely penalty you’ll incur is a late fee. First-time late payments can incur a late fee up to $28, while subsequent late fees within six billing cycles can incur fees up to $39. Both fees were increased by a dollar in January 2019. Some card issuers may waive your first late fee or not charge any at all. But, in most cases, late payments incur late fees.
- Penalty APRs. If you paid late, your credit card may penalize you by raising your card’s interest rate. This increased rate can be reset back to the original APR by making six consecutive payments on time — or remain indefinitely if your account continues to be delinquent.
- Cancellation of special financing offers. If you’re taking advantage of an introductory 0% APR period and miss a payment, you may lose out on the offer and be charged all the back interest from the date of purchase.
Can I remove a late payment from my credit report?
If the late payment is legitimate, it will most likely remain on your credit report for up to seven years. But if you notice a late payment that’s inaccurate, you can dispute it with the three credit bureaus or contact the company that reported the late payment to fix the error.
How to prevent late payments
Missing a payment or paying late once can happen to the best of us. But if you have a history of late payments, it can become a real issue. Here are some tips you can follow to limit the chance of a late payment:
- Set up autopay. If you have a stable cash flow, it can be a good idea to use automatic payments. You can set up autopay through your bank to cover just the minimum amount due or the entire statement balance every month.
- Opt in for payment reminders. Choosing to receive payment reminders via email or text can help you remember when various bills are due. You can often set reminders for when your statement is available, when a payment is due in a set amount of days or when a payment posts.
- Customize payment due dates. If you have several credit cards or recurring bills due during the month, it can be confusing to keep track of all the due dates. Many cards allow you to change your payment due date at least once so that you can select a date that works best for your budget.
- Limit spending. Maybe you had no other choice but to miss a payment because you overspent and didn’t have the money available to pay your bill. Consider budgeting apps (many are free) that can help you pinpoint areas to limit spending.
- Set up an emergency fund. An unexpected expense can arise that causes you to rack up high charges that you can’t afford, causing you to rely on your credit card too much. If you set up an emergency fund, you can have a safety net that may cover the expense — or at the very least cover your credit card’s minimum payment so that you avoid late fees and any credit score hit.