When is a late payment reflected in your credit?

It pays to be punctual, especially when it comes to bills, but what if something unexpected happens and you can’t avoid a late payment?

Well first of all, you are not alone, payment delays are more common than you think, especially in difficult times. A Apartment List online rental platform survey found that 32% of renters and homeowners entered August with unpaid housing bills from the previous month. More than 20% owe more than $1,000, according to the survey.

No matter how they happen, you’ll want to address late payments right away. It can be easy to treat a late payment like it’s no big deal, but payment history is the most important factor in calculating your credit score, representing an impressive 35% to be exact.

In this order of ideas, lenders use payment history and credit score to evaluate the probability that you will pay your debts, so a late payment on your record can affect how you qualify for future credit and loans, such as a mortgage or credit card.

When is a late payment reflected in your credit?

When does a late payment show up on my credit report?

When creditors send information to credit bureaus, they use different status codes to indicate whether the account payment is current or late. There is no code for an account that is between one and 29 days past due. Creditors will use the “current” code during that period, so a late payment won’t show up, or affect your credit score, until the delay is past 30 days.

Creditors send updates to credit bureaus At different times, and there is no way of knowing exactly when the late payment status will appear. However, many creditors send updates monthly, so you can expect the late payment to show up on your credit report within a month or two.

What happens when I am late on a payment?

There are many reasons why payments are late, but the most important thing to know is that they will affect your credit if it goes past 30 days, he says. Laura Williamscertified financial planner and founder of Worth Winning, a Dallas, Texas financial planning firm. “If you’re only a couple days late, you can still keep your credit in good standing, but you may have to pay a late fee,” he says.

The impact of a late payment depends on the due date and the terms of your agreement with the company you owe money to. Creditors and lenders typically do not report payments less than 30 days late to credit bureausbut some lenders and creditors wait 60 days before reporting late payments.

Tip: A good rule of thumb to keep in mind is that the longer you delay making the payment, the greater the damage to your credit.

As we’ve explained, your credit probably won’t suffer as long as you pay before 30 days, but you do have to pay in full, so a partial payment won’t prevent reporting to the bureaus.

Now, first of all, try to avoid falling into the habit of paying your bills late. Even if you’re just a few days late and it doesn’t affect your credit score, you could be hit with a late fee or sometimes a penalty interest rate from the creditor.

By passing the 30-day delinquency mark, your credit score could drop as much as 100 points. A late payment won’t hurt a low score as much, but it will still do some damage.

Here’s a fictional example of the effect a credit card payment 30 and 90 days late has on two people with different credit scores, based on FICO data. As you can see, Maria’s credit score drops more significantly if she misses a payment compared to Sofia.

Mary Sofia
Initial Credit Score 607 793
Number of credit accounts 7 twenty-one
Total open balances $5,760 $6,500
Credit score 30 days later 570-590 710-730
Credit score 90 days later 560-580 660-680

How long do late payments stay on the credit report?

Once a late payment is reported to the credit bureaus, it can stay on your report for seven years. It will hit your credit score the hardest when it first happens. But the older you are, the less the impact.

While you wait for a late payment to clear your credit report, you can find other ways to build your credit. For example, do your best to make payments on time and avoid overcharging your cards, which keeps your overall credit utilization low. Other strategies, like asking for a higher credit limit and paying more than the minimum amount each month, can also help.

What to do if you are late on a payment

Do not panic. The first thing you should do is pay what you owe, if possible. You can also contact your creditor to see if they’ve already reported it to the credit bureaus and discuss how to bring your account current if you can’t make the full payment on the spot.

In this order of ideas, if you do not pay, catch up as soon as you can. Let him or your creditors know that you are facing some problems, especially today with the coronavirus pandemic and what is happening with the economy.

Some creditors grant borrowers a grace period, with which you can earn a few extra days to make the payment without additional fees or penalties. But you can be charged a fee, a fine, or both, as soon as you miss the due date.

If you’re late but can pay the bill right away, talk to your creditor to see if you can get a waiver or refund of the late fee. Creditors have the right to deny your request, but may be willing to make an exception if you normally make payments on time.

If 30 days have passed and you can’t bring your account current, still contact your creditor to discuss hardship options. You may be surprised to learn that there are still options to rectify the situation.

How to avoid late payments

The key to avoiding late payments is to create a habit that makes you much less likely to miss a due date. You should apply your on-time payment goal to all your bills and accounts, including utilities, rent, and cell phone service.

Here are several strategies that can be of great help to you.

be proactive

If you think you’ll have trouble paying your bills, contact your creditor immediately, even before bills are due, to explain your financial situation and see if any adjustments can be made.

In recent months, millions of people have had their income suddenly reduced or stopped due to the coronavirus crisis, which is why many financial institutions are providing temporary help. That includes card issuers, mortgage lenders, student loan servicers, and banks. Asking for help may seem a bit daunting, but the benefits can be worth it.

You could also make payments with your credit cards throughout the month. You won’t have to worry as much about the due date if you pay off your balance little by little throughout the month. Plus, consistent payments can improve your credit utilization ratio and credit score.

Be strategic about the payment due date

Sticking to a consistent date and time to pay your bills can make managing your money easier. Many lenders and services will allow you to select or adjust payment due dates. You may need to phone a customer service representative to make the request. They will ask you for the desired expiration date and then make the change. There are two ways to do this: you can stagger certain bills to coincide with your payday, or you can pay all your bills on the same day.

Set reminders

To stay on top of your payments in the future, set up text alerts or calendar reminders a few days before bills are due. Don’t hesitate to set up several if you are prone to forgetting easily..

Use automatic payments

You might also consider automatic payments, as long as you don’t risk overdrawing your account. An automatic payment withdraws a minimum payment as soon as you receive the invoice. You can always come back later to pay more, but this tool does most of the work for you.

What to do if the late payment reported is incorrect

When your credit report shows that you have a late payment, but you know you paid the bill on time, you can file a dispute with the credit bureau and ask them to correct the information. Each of the major credit bureaus (Experian, FICO and Equifax) have different procedures, but you can file disputes with each by mail, phone, or online.

Check your credit reports to monitor your payments

Often, you’ll know when bills are past due and how much you owe. But sometimes there’s a mistake, creditors don’t have your current contact information, or you forget an account and lose correspondence. Monitoring your credit reports can help you stay on top of changes, such as reported late payments, and allow you to react quickly when there’s a problem.

Keep reading: