How Much Does One Late Payment Affect Credit Scores?

If you’re serious about your credit score, you need to pay your bills on time. One late payment can have a devastating effect on your credit score. Here’s what you need to know about late payments and your credit score, and what you can do to protect yourself.

How Late Payments Affect Credit Scores

Your payment history is the biggest factor in determining your credit score, so it’s imperative that you pay your bills on time whenever possible. If you do make a late payment, there are three factors that determine how much it will affect your credit score.

1. Your credit score and credit history
2. How long ago the late payment was
3. How severe the late payment was

According to FICO’s credit damage data, one recent late payment can cause as much as a 180-point drop on a FICO score, depending on your credit history and the severity of the late payment.

Your Credit History and Late Payments

The impact of a missed payment on your credit score varies significantly depending on your circumstances. The better your credit, the more you may feel the sting of a late payment. In fact, that 180-point drop mentioned earlier is most likely to happen to an individual with excellent credit who is 90 days late on a payment. Because individuals with good and excellent credit don’t have a history of risky behavior, one mistake sends up a red flag that can drop their score more dramatically.

Individuals with a shorter credit history will likely see a dramatic decrease in their score after a late payment as well. Because there is less information available on your financial behavior, a late payment is a bad sign. On the other hand, individuals with lower credit scores already have a history of risky behavior, so one more late payment won’t drop their score as much.

How Time Affects Credit

The more recent a late payment is, the more severely it will affect your credit score. A missed payment remains on your credit report for up to seven years from the date it occurred. The overall impact of the late payment diminishes over time and goes away completely when the missed payment ages off your report.

Your score won’t necessarily jump 100 points simply because a late payment ages off or is removed. Even though a late payment might have originally dropped your score by a good number, the impact of that late payment changes over time. How much your score goes up when a late payment is removed depends on a variety of factors, so you’ll want to continue practicing smart financial habits like making payments on time and keeping your credit utilization low.

How Severity Affects Credit

If you missed your credit card payment by one day, you probably don’t need to sweat it. In most cases, lenders and creditors have grace periods that can range from a few days to up to 10 days. Grace periods are meant to account for minor mistakes and lag in mailing or posting payments. If your payment arrives within that time period, the lender may not count it as late.

Most lenders don’t report missed payments until your account is 30 days past due. After 90 days, the effect on your credit score will be even more drastic.

Make sure to read the fine print on your account agreement, though, to know if you have a grace period. And avoid falling into the habit of relying on the grace period. If you’re used to paying your bill five days after the actual due date, you could miss the grace period if you experience a personal emergency. Also keep in mind that interest and fees may still apply during the grace period, even if your payment isn’t reported as late to the credit bureaus.

How to Protect Your Credit History Against Late Payment Impact

Payment history is a huge part of your credit score. It accounts for around 35% of your score—over a third. Take action to ensure late payments aren’t impacting your score when they don’t need to. Here are three tips for doing so.

1. Check Your Credit Score and Report Regularly

Check your credit reports frequently to ensure late payments aren’t being reported inaccurately. A simple clerical error is enough to cause your score to go down. If you see inaccurate information on your credit reports, you can and should challenge it and ask for verification.

You can get a free credit report annually from each of the three credit bureaus. Due to the COVID-19 crisis, you can get your free credit report once a week through April 2022. When you request your credit report from AnnualCreditReport.com or the individual credit bureaus, you won’t also see your credit score. If you want to see both at the same time, consider signing up for ExtraCredit. You’ll see 28 of your FICO scores from all three credit bureaus, plus your credit reports from each.

2. Use Tools to Help You Make Timely Payments

Avoid late payments by using resources that ensure you make payments on time each month.

• Sign up for auto payments. Your lender may offer this option, letting you enter a credit or debit card or checking account and taking payments out of that account each month. The benefit is that you can set and forget your payments, never worrying that they’re late. The disadvantage is that you have less flexibility in when you pay each month, and you have to ensure you keep a balance in your account to cover the charges.
• Use apps or phone alarms. Remind yourself to make payments with app notifications that let you know the payment date is arriving soon. Many credit card companies and other lenders offer options for receiving such notifications directly from them.
• Make smaller, more frequent payments. If you’re struggling to save enough to cover a large bill each month, pay a portion of what’s owed every week. This can help simplify your budget, though you do need to ensure you’re not being charged convenience fees or other amounts every time you make a payment.

3. Ask for One-Time Late Payments to Be Forgiven

Life happens, and creditors are aware of this. So if you do find yourself making a one-off late payment, contact your creditor.

Apologize for the late payment, let them know it’s not a normal occurrence for you and point to your previously pristine payment history. Ask the creditor to waive late fees and interest charges as a courtesy and not report the late payment to the credit bureaus. It’s a tool you must use sparingly, but creditors may to oblige if you really do normally pay on time.

Your Credit Score Will Thank You

Making all your bill payments on time is one of the best ways to keep your credit score happy and healthy. Keep track of how you’re doing by signing up for ExtraCredit.

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