Wisely managing credit cards is essential to growing your credit score. Sometimes life can get in the way and you miss a payment. Being a few days late may be of minimal consequence, but being 30 days late can have a fatal impact on your financial health. It doesn’t have to stay that way. Here’s how to deal with late payments and prevent them from ruining your financial life.
When is a payment considered to be late?
In reality, a payment is late once you miss the due date. Practically, past due payments aren’t reported to credit bureaus until after 30 days. If you make a minimum payment prior to being 30 days late, you will likely incur a late fee but, in many cases, it’s fair to expect no impact on your credit score.
As payment history is the largest component of a credit score, it’s fair to expect a significant negative impact once you reach the 30-day threshold. Effects intensify if your account isn’t brought current. Worse yet, your credit card can incur a penalty APR, if you’ve not made a payment for 60 days, which is capped at 29.99%.
How long do missed payments stay on your credit report?
Late payments commonly stay on credit reports for up to seven years. Unfortunately, the impact can be ruinous as payment history comprises 35% of a credit score, and it takes time to remedy the situation. “Late payments…take much longer to recover from than many people expect, even if you resume on-time payments,” says Kristy Kim, CEO and founder of TomoCredit, a fintech company that aims to provide credit access to individuals with limited or no credit history.
Kim also adds that it’s fair to expect an instant impact on your score, often dozens of points or more. It may be relatively easy to recover if it’s a one-time occurrence, but missing multiple payments can exacerbate the problem. “If you miss payments on multiple cards within a short period, the damage compounds and signals a higher risk to lenders, making the negative impact on your score even worse and the recovery process even slower,” notes Kim.
Once a payment is at least 90 days late it qualifies to be sent to collections, which can further ruin a credit history.
Ways to get late payments removed from your credit report
Thankfully, there are some solutions for late payments and they start with a credit report. If the payment was only several days late, it’s not reported to credit agencies. However, if a payment was errantly reported late, you can dispute the error with the respective agency. Assuming the bureau is unable to verify the late payment, they must remove it.
You can also inform the credit card company of the dispute, as the agency may request additional information. If the late payment was legitimately reported you have fewer opportunities to dispute it.
One solution for late payment forgiveness is a goodwill letter. Kim describes this letter, explaining, “This involves contacting the creditor directly…and requesting that they remove the late payment as a gesture of goodwill, especially if you have a strong payment history or experienced a temporary hardship.” Think of this option as negotiating with the creditor and asking them not to report the missed payment.
Unfortunately, there’s no guarantee that the credit card company will remove the late payment, especially if you have multiple occurrences or you haven’t brought the past due account current. You may see advertisements promising ways to remove late payments from your credit report. These are commonly untrustworthy and not worth pursuing.
How to avoid late payments
Late payments can be particularly harmful to a credit score. Fortunately, there are some simple options to avoid potential issues, including:
Use autopay: Most credit card companies offer automated payments. If you can do this without negatively impacting your budget, enroll in autopayments.
Change the due date: Does the due date fall during an inconvenient period each month? You may have the opportunity to change your due date with the credit card company to a more convenient time. Banks vary in their flexibility, but this can be worth pursuing.
Create reminders: Creating calendar reminders on your phone is an easy way to avoid missing payments. Set a reminder for a week before the payment is due to remember to make a timely payment. Some credit cards even offer text reminders to accomplish the same thing.
Make multiple payments: You can make a payment whenever you want. Making weekly or bi-weekly payments can be a creative way to ensure you don’t miss a payment.
Frequently asked questions about past due payments
The impact of late payments on credit cards can be substantial. It’s essential to act judiciously when trying to protect your credit history. These are some common questions people have when managing their payment history.
Can I get late payments removed from my credit report early?
Unless the late payment was reported in error, it’s commonly not possible to remove late payments. Expect the late payment to stay on a credit report for seven years.
A goodwill letter can be one avenue to eliminate the reporting, but it’s not guaranteed. Reviewing your credit report regularly is the best way to catch erroneous late payments.
How many late payments affect credit score?
It only takes one late payment to harm your credit score. If you miss multiple payments or have late payments on multiple cards, it’s fair to expect that the impact will worsen.
How long does it take for credit to recover from late payments?
Having a reported late payment instantly impacts your credit score. Thankfully, it won’t stay that way forever. “Your credit score can begin to recover within a few months after a late payment, but the pace depends on how severe the delinquency was and how consistently you make on-time payments moving forward,” says Kim.
The bottom line on late payment consequences
Late payments can have a severely harmful impact on a credit score. It can also hinder your attempts to borrow money in the future or lead to higher interest rates. While it will reflect on your credit report for seven years, there are ways to recover. The best course of action is to work to avoid late payments. Staying on budget and mindfully making payments safeguards your credit to help simplify achieving future goals.
