How Much Will One Late Payment Hurt My Credit Score?

Doctor Analyzing Credit CardsMost people know that missing payments on a loan or credit card can be incredibly damaging to your ability to get credit in the future. Late payments are reported to credit agencies, which can result in dozens of points in hits to your FICO credit score. Everyone, however, runs into issues now and again: your paycheck comes in late, you have an unexpected expense or the like, and you miss one payment. Here’s a look at how much one late payment hurts your credit score.

 

Credit Reports

Missing a payment on a credit account can damage your credit score, at least on a temporary basis. If this happens, you might have a bit more difficulty gaining new credit down the line. Lenders review your credit report to determine if you are a risky borrower, and your payment history is the largest factor in this decision. Late payments can be reported to the credit reporting agencies and are listed based on how late they are.

 

Late Payments and Your Credit

Late payments have varying effects on your credit score. How severe is the late payment? How recent was it? How frequently have you paid late?

If the late payment is on a major credit account such as student loans or mortgages, it will have a more severe effect on your credit score. In addition, the more recent the missed payment was, the worse it will reflect. If you missed a single payment four years ago, for example, it may not factor into credit decisions, but if the missed payment was last month, it will have a greater effect. Finally, if you regularly miss payments, you will most definitely see your credit score plummet and have problems getting new credit.

 

The Hits Keep on Coming

Generally speaking, the longer a bill goes unpaid, the worse it looks. This is because the hits to your credit score are cumulative the longer you take to get caught up. For example, if you miss a payment but catch up next month, you’re less likely to suffer great damage than if you take three or six months to get caught up.

A 30 day delinquency can cause a drop of around 100 points on your credit score. A 90-day loss can suffer an additional 80 (or more) point loss on top of the 30 day hit. These “black marks” on your credit score can remain for up to seven years.

 

What to Do

If you miss a payment, it’s vital to get caught up as soon as you can. Call your creditor and inform them of your situation right away; they may be able to work with you to set up financial hardship arrangements and reduce or forbear your payments temporarily. This can be a saving grace for those in hard economic times. Keep an eye on your credit report and make sure that you stay on top of all of your obligations.

Are you looking to refinance your auto loan to reduce your monthly bills and avoid a late payment that can hurt your credit score? Check out our resources and get in touch to get started today!

Posted in: Credit Myths

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