How Late Payments Affect Credit And How To Recover Quickly
How Late Payments Affect Your Credit
If you missed your credit card payment due date or are way behind on several payments, the credit bureaus are watching. Late payments affect your credit score in a large way and for a long time, therefore it’s vital to understand how you can both avoid and recover from them.
What is a late payment? A late payment is when the amount of money you are submitting for services rendered is provided after the due date.
Some companies will offer a grace period, which is a set amount of time to make a payment that is owed without being penalized. This grace period is a nice perk as it can give you the extra time to find the money to pay without being charged interest. A late fee still may apply.
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How Long Does A Late Payment Affect Your Credit
The bad news is a late payment can stay on your credit report for up to seven years. The good news is you can work to build up your credit during that time, correct your past mistakes and learn from them.
Late payments can significantly impact your credit score, which is based on your credit report. The amount of credit cards is not the focus, as long as you’re paying them all on time. The more you have that are unpaid, the worse impact it will have on your credit score and opportunities available to you based on that credit score.
Ignoring your credit card due date doesn’t just result in a bad credit score. There are late fees and increased interest rates that accrue every month that you fail to pay. If you have multiple accounts, this can really add up.
Different Types Of Late Payments
Late payments fall into the following classifications:
- 30 Days Late
- 60 Days Late
- 120 Days late
- 150 Days Late
- Charge Off
Late payments will typically not end up on your credit report for at least 30 days after the date you miss your payment. That means you have a 30 day late credit card payment grace period to get the payment in before the credit bureaus find out about it.
Information is sent to credit bureaus at various times, so it’s hard to know when your late payment will be reflected in your report. That’s why it’s best to pay as soon as possible.
If you continue to ignore your bills, you may be getting a phone call or 20 from a collection agency. Collection accounts have a significant negative impact on your credit scores.
At some point, when all communication fails and it’s clear you aren’t paying, your account could be charged-off. This means there is little to no expectation of you paying, the account is closed and will be reflected on your credit record for seven years. This doesn’t mean you are in the clear, as legally, you still owe this money. A charge-off should be avoided at all costs.
Ways To Improve From Late Payments
The goal is of course to pay your bills on time, but we are all human and it’s easy to get behind on payments. It happens a lot. There are ways to dig yourself out of the hole you created, especially if you made a one time simple mistake.
- Check to ensure your credit score is accurate.
- It’s estimated that at least 6 million credit reports are inaccurate. If you think something doesn’t look right, look into it right away so you know your rights and options.
- Seek professional help.
- Set up auto pay for your accounts.
- Skip the stress of missing your due date and let your online bank take care of everything.
- Whether a bill gets lost in the mail or tossed out by mistake, you know it’s paid every month, on time.
- Remove your late fee.
- If you’re in good standing with your credit card company, give them a call and ask for your late fee to be removed.
- If you usually pay on time, but for some reason, missed this month, they will usually grant you the credit back to your account.
- Write a goodwill letter.
- This is a way explaining your hardships and reasons for late payments.
- It’s an attempt to erase a late payment from your credit report due to special circumstances.
- You have a better chance of being forgiven for your late payment if you have a good history with the account.
- If your letter is approved, your credit report will be adjusted.
You can manage your credit score and plan for your future. Be smart, pay your bills and utilize professionals, such as US Allied Financial to help with the credit issues your late payments may have caused.