Surviving a Late Payment

Payment history is one of the most important categories of your credit report. It makes up 35% of your credit score. With busy lives and so much to keep up with it is, at times, possible for a payment to be missed. For things that do not report on your credit file, i.e., utilities, rent, etc. missing one payment usually is not the end of the world and can normally be remedied fairly easily. For items that do report to the credit bureaus it is a different matter.

One late payment can drop a score up to 180 points. To clarify, this does not mean a late payment that is 5-10 days past due, those are not reported. You may incur a late fee, but it will not be reported as late on your credit file. The payments that are over 30 days past due are the ones reported to the credit bureaus. Say you have a score in the upper 700’s, one late payment could easily drop that score down to the mid 600’s.

Most people are under the impression that as long as they do not incur a late payment on their mortgage that they’re ok, but late payments don’t discriminate. A late payment on your Discover or Victoria’s Secret card will have the same detrimental impact as a late payment on your mortgage.

If you discover a late payment on your credit report, there are things you can do to remedy the situation. Call the creditor and ask for a “good will adjustment”. This is a verbal way of asking if they will remove the late payment as long as another one never happens. If you have had the account for a long time and have no other late payments on it there is a good chance they may agree to do this.

Another option is to ask for a one-time courtesy removal. There are several credit cards who will agree to remove one late payment per year if there are no other late payments. On some credit cards you can find verbiage that says this in the fine print of the disclaimers you receive when the card is first opened. Asking about late payment policies up front is always a good idea when opening a new card. When inquiring about having a late payment removed you should always ask to speak to a manager. Chances are the person that just answers the phone is not authorized to approve such a request.

How do you avoid a possible late payment? The best way is to set the account up for automatic payments. That can be tricky and is not always possible depending on how much the payment is and the time of the month it occurs. Another option would be to set reminders on your phone to remind you a week or so before the payment is due. Paying the bill as soon as you receive it in the mail and paying it before it is actually due are other good practices to get in the habit of doing.

While late payments can have a pretty devastating impact on your credit scores at the onset, it is only temporary. While it will have some affect for the entire seven years it is there, it will lessen over time. After you are two years out from the late payment it will have less and less of an effect. However, it will not be until it entirely falls off that the scores will completely rebound.

In the long run it is just extremely important to be diligent about making payments early or at the very least on time. Your credit score and future self will thank you!