Posted on: Dec. 18, 2017 in Uncategorized

35% of your credit score is determined by your credit history. That means missed payments can really drag your score down. You may think that just missing one is no big deal, or that if you’re only a little late it doesn’t matter. If your payment is there on time but it’s short, do you think that would be okay? Nope, all of these seemingly small mistakes can have some very big consequences.


When Is Late?

You’ve probably heard someone tell you it’s okay if your payment is only a day or two late since there’s a grace period. People use the term grace period in many circumstances, however, not every debt comes with a grace period to buy you time. Credit cards often do not report late payments to credit bureaus until they are at least 30 days late, so you may be okay here (note that there other consequences, so keep reading!). You are taking a chance though that your late payment could be reported and land on your credit history.

All your other lenders may not be so generous. Your car payment, mortgage, and other loans may report immediately. If you can, it’s best not to tempt fate. If you think your payment won’t make it on time, call the lender in advance to try working it out before it’s late.

One late payment can bring your score down by 60-110 points, and that’s more than enough to take you from good credit to bad quickly. If you have multiple late payments or this isn’t your first time, you can see a larger drop than someone who has never missed a payment before.

Other Consequences of Late Payments

While your credit card issuer may not report your payment as late if it gets there within 30 days, they may still take other actions. These can include:

  • Raising your interest rate. Read the fine print on your credit card agreement. Your rate could go as high as 30% if you’re significantly late.
  • Lowering your credit limit. The issuer may scale back the amount you can borrow.
  • Removing promotional features. If your card comes with cash back, points, or balance transfer offers, you can lose them all if you’re late.
  • Charging fees. Even if you’re one day late, your card issuer may charge a fee, typically between $25 and $35. You can probably get a pass on one late payment fee if you have a great history with the lender, but don’t count on that to work more than once.

Late Payments Follow You

Once a late payment is reported to the credit bureaus, it can remain on your history for years to come. Each time you apply for new credit, lenders will see that blemish and think again before extending you credit. You’ll be seen as a risky borrower and banks and lenders just don’t like taking risks. If they do extend a loan or credit, be prepared for a higher interest rate.

The good news is that if you do have a slip, as long as you make all future payments on time, the damage you do to your credit will be less severe and, in time, these dark spots will fall off your report.

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