No one likes to be late on a payment, but sometimes life gets in the way. Things happen beyond your control that can leave you short on cash or maybe the bill just slipped your mind. Suddenly, you find yourself asking the question, “Will a late payment hurt my credit?” In some cases, yes. But it isn’t a cut-and-dried situation. Depending on the type of account you have and how late your payment is, there are different implications to consider. Read on to learn what you need to know about late payments and your credit.
When paying late is really too late
One of the worst ramifications of not paying your bills on time is having it negatively impact your credit score. If your score goes down, future attempts to get credit or loans, including mortgages and car loans and apartment rentals, become much harder. You’ll likely end up with fewer lender options and a higher interest rate for borrowing.
Housing and utility bills
Not all bills are created equal. As a general rule, the history of many bills, like rent and utility payments, are not reported to credit bureaus. In other words, your score likely doesn’t get any help from paying on time, but it’s also likely you won’t get dinged if you’re late.
But that doesn’t mean you can stay delinquent forever. The longer you don’t pay one of these bills — often after a second and third notice — your landlord or utility company will likely turn over your overdue account for collections. Never mind the fact that collections calls are annoying and depressing, your credit score will get dinged once you get turned over to collections. Having an account in collections can hurt your credit standing even after you pay off your debt in full.
Credit cards and loans
With loans and credit card bills, your payment history is regularly reported to the major credit bureaus. Most lenders report missed payments after 30 days so if your payment is only slightly overdue (29 days), chances are it won’t show up on your credit report.
Once the major credit bureaus are notified (after 30 days), a late payment can stay on your credit report for seven years. Payment history accounts for more than one-third of your credit score, meaning a series of late payments could turn a good credit score into a bad one very quickly.
The good news is that if you take action quickly and catch up with all missed payments within two months or less, chances are it won’t have too much of an impact on your credit score in the long run.
Payments that are 60 days past due can cause significant damage to your score. The impact increases the longer you go without making a payment. Eventually, the debt goes to collections.
In addition to the damaging credit consequences, credit card companies will still often charge you a late fee of about $35 if your payment isn’t on time. And you can rack up additional late fees if you miss more due dates. Ouch!
If your late payments multiply, you also risk seeing your interest rate rise. For example, a penalty rate on a credit card can climb to as high as a 30% annual percentage rate (APR), which will immediately increase your monthly finance charge. If you miss a payment on a zero-percent teaser rate card, chances are you’ll forfeit that promotional rate and get moved up to the default interest rate.
Sometimes your credit report includes errors that bring your score down. Getting rid of errors or misleading information on your credit report is one of the best ways to improve your credit score. You can check your credit report by requesting a copy from each of the major credit bureaus — Equifax, Experian, or TransUnion — through the government-recommended site annualcreditreport.com or through a third-party credit monitoring site.
If you see errors or discrepancies, you’ll want to dispute them with each bureau. Once you file the dispute, the bureau must investigate. If there are errors or the creditor fails to respond, the debt is removed from your credit report.
Benefits of paying on time
Paying your bills on time is essential to maintaining a good financial record. From credit cards to loans, paying your bills on time can help you build and maintain a strong credit score and save you money in the long run.
Even if you have only missed one bill payment, it may still prevent you from getting approved for future loan applications with favorable interest rates. Making timely payments helps keep these costs down while also helping protect your overall financial health.
If you’ve got bills to pay, make sure to pay them on time every month — not just for larger loans or credit cards but for all of your expenses. By doing this, you will be building a strong track record of timely payments that will reflect positively in your credit score.
But what if the money just isn’t there? Prioritize which debts get paid first — not all debts are created equal when it comes to their impact on your credit score. For example, paying off a medical bill typically has less impact on your overall score than paying off an overdue mortgage or auto loan would have so pay those obligations first.
What to do when you’re late on a payment
When you’re late on a payment, it’s important to take steps to get back on track as soon as possible. The sooner you take action, the better off you’ll be.
Pay your bill as soon as possible
Paying the bill is the first step — it’s best to do this as quickly as you can. If your funds are limited and you can’t pay in full, make a partial payment to start with and then follow up with another payment once you have more money available.
Request to waive any late fees
Once your payment has been made, contact the lender and ask whether they would consider waiving any late fees that have been charged. Some lenders may be willing to work with customers who have encountered financial difficulty by providing leniency on late fees or making alternative payment arrangements.
Get back into on-time payments
Remain proactive and take steps toward getting back on track as soon as possible. Don’t let a bad month get you down. Once you’ve made sure all of your payments are up to date and accounted for, set a reminder in your calendar or phone so that future payments don’t slip through the cracks again.
If you’re experiencing financial hardship, don’t ignore your debts. It’s always better to discuss your concerns with your lender or creditor before you fall too far behind.
Monitor your accounts
You’ll want to double-check that all of your other bills are up to date and that you’re staying within your financial limits. Depending on how much you owe, you might need to make some changes to reduce costs in another area in order to cover the bills each month.
Keep an eye on your credit score
It’s also important to keep an eye on your credit score so that any changes are immediately apparent. Unpaid bills or late payments can have a negative effect on your credit score, but having an accurate understanding of where your score stands will help ensure that any issues are resolved in a timely manner.
Bouncing Back
No one wants to be late with their payments but sometimes we find ourselves in situations where we just can’t make ends meet in time for our bills’ due dates. There are steps we can take to mitigate any potential fallout from missing those important deadlines — including understanding potential penalties associated with different types of loans and prioritizing which obligations should be taken care of first given our current financial circ*mstances. It’s also important to remember that taking action quickly can help minimize any lasting damage done by overdue payments — so don’t waste any time getting back into good standing with creditors!
FAQ
How long will a late payment affect your credit?
A late payment can remain on your credit report for seven years once it’s reported to the bureaus.
What happens if you don’t pay your credit card?
If you don’t pay your credit card, the creditor will report the missed payments to the credit bureaus. The longer you go without paying, the more your credit score will suffer.
Do late payments ever go away?
Late payments fall off your credit report after seven years, but the impact will diminish over time. Timely payments and good credit habits going forward can help offset the negative impact of the late payment.
Jeannine Macini Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies and a Master of Arts in Career and Technical Education from the University of Central Florida.
