A little late may not be a big deal.
Many finance and credit experts are guilty of casting late payments as the supervillain of the credit world. "Beware the Late Payment, or your credit will be doomed!"
While a handy message, the problem isn't actually that simple. Sure, late credit card payments can do some serious credit damage if you're significantly past due. But falling a little behind isn't always the end of the world.
Instead of vilifying every late payment, we really need to have a conversation about the difference between making a late payment and having a delinquent account. They're not always the same thing.
Your credit report isn't impacted until 30-plus days past due
In order for something to impact your credit scores, it needs to be on your credit reports. The credit card companies aren't allowed to report your account as delinquent to the credit bureaus until you're more than 30 days past your due date.
This means that paying your credit card a day, a week, or even a few weeks late won't impact your credit score.
It's not until you're past the 30-day mark that your account is technically delinquent and can be reported as such. Some credit card issuers may wait up to 60 days past your due date before reporting your delinquent account, but this can vary widely and shouldn't be relied upon.
No credit impact doesn't mean zero consequences
While not every late payment is a credit disaster, they're still something to be avoided. For one thing, you'll probably get stuck with a late fee, typically in the $20 to $40 range. Then there's the interest fees; since you won't be within the card's grace period, you'll be charged interest fees on your entire balance.
Moreover, if you were enjoying an 0% intro APR offer on your card, a late payment could terminate the offer early. Even if you're not in the middle of an APR deal, your interest rate could increase. Many cards will jack up your standard APR to a much higher penalty APR if you make a late payment. The penalty rate could last six months -- or indefinitely.
The more past due you become, the worse it gets
So, paying a little late sucks, but it won't wreck your credit. The longer you wait to repay your account, however, the worse it gets.
It takes 30 to 60 days of nonpayment for your account to be reported as delinquent to the credit bureaus. Once your account has been reported as delinquent, your credit scores will take a hit -- likely a large one. Your payment history is worth 35% of your FICO® Score, so a delinquent account can cause some serious damage.
And that damage only gets worse over time. Each additional 30 days past your due date you become, the more damage your credit will face. For example, an account that is 90 days past due does more credit damage than one 60 days past due, and so on.
If your account falls so behind that you're more than 180 days past your due date, the credit card company will typically close your account and write off the debt. This doesn't mean you're off the hook, though. This is when your debt gets sold to a collection agency.
Once the collection agency has your debt, your chances of working out a deal with the credit card company go out the window. The collection agency may call, text, send emails, or send letters demanding you pay your debt. If all that fails, a debt collector may take you to court where a judge could order you to pay the debt and/or garnish your wages.
You may be able to avoid a late payment altogether
All you need to do to avoid a late payment is to make at least your minimum required payment (usually a small percentage of your balance). As long as that minimum payment is made before your due date, your account is technically in good standing, and you won't have a late payment fee, APR hike, or credit damage. (You'll still have interest fees, however.)
If you know you can't make your minimum payment by your due date, the best thing to do is get proactive and contact your card issuer -- the sooner, the better. Ideally, contact your issuer before you approach the first due date you don't think you can meet. Most issuers will be able to help you set up a payment plan or may even offer to waive your late fees for a few months to help you get back on track.
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