Being late on a payment can slowly sink your credit score while you’re focused on…
pretty much anything else. The result? Just a single missed payment can set off a
domino effect of negative financial consequences, and a recent report shows that even
missed payments on credit cards are at a 12-year high, with 0.9% pushing past the 90-
day delinquency mark.
A late payment can happen to anyone, name your reason, but the question is, what do
you do about it? Let’s break down how they work, what damage can be done to your
credit, and how you can avoid them.
Do Late Payments Impact Credit?
The bad news? Yes, late payments can negatively impact your credit score, particularly
in cases where loans are reported by the lender/creditor to the major credit bureaus.
Student loans, car loans, credit cards, personal loans, mortgages are all subject to
having payment behavior delinquencies reported after 30 days of being overdue.
Unfortunately, even one missed payment can harm your credit.
Payment history comprises 35% of your FICO score, so once a missed payment climbs
to 60, 90, or over 120 days, the greater the damage is to your credit. For starters, a 30-
day missed payment could mean a 90 to 110 point decrease to your score (depending
on credit history, etc.), with 120+ day delinquencies potentially making it impossible to
be approved for loans or better interest rates. Bottom line, late payments can and do
impact your credit hard.
How Can You Avoid Late Payments?
If you want to avoid late payments, it really comes down to what you put into it: being
organized and a little proactive with managing your finances can go a long way. Maybe
you can’t seem to keep track of upcoming payments, no problem, maybe enroll in
autopay through your bank or with the service provider. This way, your payments are
withdrawn automatically without you having to even think about it.
You can also try scheduling payments around your pay schedule so you don’t have to
worry about having insufficient funds. Most lenders have no issue with letting you
change or adjust due dates, just ask them. Along with scheduling, apps like You Need a
Budget (YNAB) set up payment alerts prior to due dates, not to mention you can use the
calendar reminder feature on your smartphone to essentially do the same thing, and it’s
something you already have access to. If all this fails, and you’d really rather not risk
defaulting on a loan (especially with loans like automotive loans and mortgages) then
you can try and use a short term loan as a stopgap. Getting an emergency loan for bad
credit is even a possibility.
If possible, aim for keeping $100 to $500 in your account to protect against accidental
overdrafts of payments you might have forgotten about. One way to dodge unexpected
surprises like this is to use a budget worksheet in tandem with automatic reminders.
Lenders and creditors aren’t the bad guys, and if you know you’ll be late or have a
missed payment, call or email them to see what options you may have. It’s all about
taking action before the negative consequences take hold of your credit.
Can You Get a Late Payment Forgiven?
Although not guaranteed, some people have had luck with “goodwill adjustments” when
you’re typically on time with making payments, but due to circumstances, you were late.
Here, you might try writing a goodwill letter to the creditor where you explain (politely,
professionally, with zero attitude) why you missed making the payment, resulting in the
negative mark.
You’re not writing a novel; keep it brief, to the point, and take accountability for the
mistake. Above all, be sure to send the letter to the lender/creditor reporting the
delinquency to the credit bureaus, not to the credit bureaus. However, they do not have
to consider the letter at all and can even run into trouble themselves if honored, since
they must refer only accurate credit information under the Fair Credit Reporting Act
(FCRA).
A goodwill letter might be more of a long shot, but it could work in your favor and costs
nothing to try.
Can You Get Late Payments Taken Off?
As much as we’d like it, there’s no magic wand to make legitimate late payments
disappear, but you can try disputing the inaccurate ones to have them taken off your
credit report. Here are a few things you can try:
Check Your Credit
If you’re not regularly reviewing your credit report, you should start today. Try Experian,
Equifax, or TransUnion to see if there are any inaccuracies, like payments you know for
certain you’ve made on time, and dispute them. Keep in mind, most creditors will not
refer your account until the 30-day mark, but other fees/penalties can start accruing
after just one day of delinquency.
File a Dispute
Just like with a goodwill letter, filing a dispute comes at no cost. You just have all the
documentation you need as proof or evidence (such as emails with payment
verification), submit it, and be prepared to wait up to 30 days for an investigation. If a
decision is made in your favor, you’ll be sent an update to the three credit bureaus with
the late payment corrected or deleted.
Or, Try the Waiting Game
If you’d rather not go to all the trouble with filing a dispute and dealing with all the
documentation and paperwork involved, you can try the waiting game instead. A late
payment will be reflected on your credit report for at least seven years, but even after
just two years, the negative impact on your score can diminish and not be weighed
against you as heavily.
Whether you decide to file a dispute or to wait, you’ll need to try making your payments
on time, all the time, to gradually start shaking off the negative impact on your credit
score. “Time heals all wounds.” The same can be true with your credit, if you can stay
on top of it with consistent, on-time payments.
How to Make a Late Payment Go Away?
While it may not always be possible to make a late payment vanish in all cases,
particularly if it’s verifiably late or a mistake on your end, you can try paying a late
payment as soon as you can after 30 days overdue to regain a little leverage. But
mistakes occur, and if a late payment is inaccurate, it must be removed according to the
FCRA.
If you’ve taken the steps to file a dispute but would like help or direction on how to turn
your overall credit around, you can contact the National Foundation for Credit
Counseling (NFCC) to start working with a certified credit counselor to get solid advice,
tips, and even a plan customized to your specific financial situation and goals.
However, how can you begin to fix problems if you don’t know about them? This is why
it’s vital to keep an eye on your credit to quickly catch inaccuracies. AnnualCreditReport
is a great resource to track your credit, and it’s totally free (every 12 months, federal law
states you’re due a free report from the big three bureaus), so you’ll be more aware of
where you stand in your overall financial progress.
Late Payments Are Not Always the Kiss of Death
Late payments don’t have to be the nail in the coffin of your financial health! Instead, it’s
just sort of a little bug that you can remedy with the right tools and mindset. Again,
what’s important is to strive to start making all payments on time so that your credit
score may increase steadily over time.
The good news is that creditors also take into account your complete credit history, and
if there’s a showing of consistent on-time payments, it can outweigh a few past
blemishes so late payments don’t have to be the kiss of financial death. Simply show
that you can pay them on time. As long as you stay aware of your credit and upcoming
payments, you stay in control.