- Recently, I lost track of my bills and forgot to make a mortgage payment.
- I previously had a credit score in the mid 800s.
- My score fell around 140 points due to my error.
You'll be surprised to find how big of an impact one error can make.
Recently, I made a big financial mistake. I lost track of my bill-paying schedule. And, as a result, I ended up missing a mortgage payment.
I wasn't just a little behind, either. Most mortgage lenders provide a grace period after the payment due date. That grace period is generally around 15 days. Unfortunately, I didn't realize my error until way beyond that time had passed. In fact, my payment was due on November 1, 2021 but I didn't end up sending in payment until January 11, 2022.
Needless to say, my mortgage lender wasn't really happy about the delay. And my payment was late enough that my tardiness was reported to the three major credit reporting agencies. To say this isn't ideal is an understatement, as payment record is one of the key factors determining your credit score.
While I knew my score would take a hit, I was surprised at just how profoundly a single late payment affected my otherwise stellar credit record.
One late mortgage payment dropped my credit score by 140 points
Prior to the mortgage incident, I'd been responsible for more than two decades with making my mortgage payments -- and other debt payments -- on time. As a result, I'd earned a credit score that bounced between 830 and 836. Since credit scores can range from 300 to 850, this was considered an excellent score.
Unfortunately, after my mortgage lender reported my late payment, my score fell all the way down to 700. While this is still considered to be a good score, it's far below the heights I'd attained before my mistake.
Now, part of the reason my score went down so much is because it was so high to begin with. When something in near-perfect condition gets a flaw, it’s going to stand out more. If I'd already had a lower score due to missed payments or other issues, the credit score formula would be expecting some irresponsible borrowing behavior from me. Adding another late payment to the list wouldn't have as big of an impact because it wouldn’t be so unusual.
But, since paying late was out of character, it suggests something has changed in my financial situation that makes me a less reliable borrower. The big drop in my score sends up a red flag and alerts lenders to be a little more cautious before doing business with me.
How to fix -- or avoid -- my big mistake
The good news is, I have plans to fix the situation now that I've realized the error.
First and foremost, I'll be calling my mortgage lender to ask them if they'd be willing to work with me. Since I have a long and solid history of paying on time, I plan to ask my lender if they would overlook my mistake and remove the record of it from my credit report.
While there's no guarantee my mortgage provider will agree to either waive the late fees or stop reporting my late payment, it's common for creditors to do this for good customers who make one simple mistake. It's always worth asking, and in fact, if the first customer service person I speak to turns me down, I'll probably call a few times to try my luck with a different representative.
Moving forward, I'll also set up automatic mortgage payments from my bank account. This will ensure I never lose track of my bills again, so I don't see a further hit to my credit score. If you have a mortgage -- or other debts to pay -- and you're confident automatic payments won't end up overdrafting your bank account, this can be a good way to go.
By taking these steps, I hope to get my credit score back up into the 800s ASAP. And if you have your own loans, you can learn from my error and hopefully avoid taking a hit to your own credit.
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