One bad grade on your report card. One speeding ticket. In the grand scheme of things, does it really matter all that much? Probably not, but in the short term, you probably felt the consequences of such small mistakes in the form of a lowered grade-point average or a higher insurance premium.
Itโs the same with credit. Having one late payment on your credit report could knock a chunk of points off your credit score, despite the years of pristine payment history you may have built.
Whatโs the Big Deal?
How a late payment impacts your credit score depends on the scoring model โ some place less weight on isolated incidents โ but payment history often has the biggest impact on your credit score.
โItโs simply because itโs predictive,โ said Gerri Detweiler, Credit.comโs director of consumer education. โOne late payment indicates that youโre more likely to fall behind on other bills.โ The analytics companies that build these scoring models crunch data that show that relationship, which is why you could see your credit score plummet after a missed bill.
Sometimes itโs an indication that youโre running into financial trouble, and sometimes itโs an honest mistake, but lots of times, sloppiness plays a role.
โIf youโre disorganized, youโre more likely to miss payments,โ Detweiler said. โAnd itโs more likely to become a pattern.โ
Now What?
Once a bill is 30 days past due, it gets reported to the credit reporting agencies. It goes on your credit report, and it can stay there for the next seven years.
Donโt get too discouraged. It sounds like a long time, but as time goes on, that missed payment will have less of an impact on your credit score.
Four years ago, Detweiler ended up with a ding on her credit report after she found out (too late) that a payment didnโt go through.
โWhenever I get a credit score, it never really mentions Iโm being penalized for it,โ she said.
You might also be able to get it removed if you act quickly. If you have a solid history of making payments on time and have a good reason for missing one bill, you can reach out to your lender, and they might take it off your report. It doesnโt hurt to ask.
More than anything, you should focus on making sure a single mistake doesnโt become a habit.
โItโs highly annoying but these things do happen,โ Detweiler said. โItโs not good, but you know, do what you can, and focus on making payments in the future.โ
If you want to see how late payments are affecting your credit scores, the free Credit Report Card will give you a letter grade on all the major credit scoring factors, plus two credit scores that are updates monthly.
More on Credit Reports and Credit Scores:
- The Credit.com Credit Score Learning Center
- Whatโs a Good Credit Score?
- How to Get Your Free Annual Credit Report
- How Do I Dispute an Error on My Credit Report?
- Whatโs a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life
Image: iStock
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