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How Does a Late Payment Affect My Credit Score?

Kimberly Rotter, AFC®
By: Kimberly Rotter, AFC®

Our Personal Finance Expert

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Anyone who's missed a credit card payment knows how alarming it can be once you realize it. You start thinking about how much this will cost you in late fees, and more importantly, what kind of a hit your credit score will take.

It's understandable to feel this way, especially when your payment history accounts for about 35% of your FICO® Score. No one wants an honest mistake to tank their credit. But before you worry, you should know exactly how late credit card payments work and whether your payment will even be reported as late.

What's considered a late credit card payment?

This would make a good trick question on a test. While the obvious answer is "any credit card payment made after the due date," that's not how the credit bureau sees it.

Your card issuer can't report your payment as late to any of the three credit bureaus until it's at least 30 days past the due date. That's because all those credit bureaus use the Metro 2 Reporting Format, which requires that creditors follow the Industry Standard for Reporting Account Delinquency. Here's how it works.

On the reporting date, your card issuer sends a status code about your account to each credit bureau that it reports to (all creditors don't necessarily report to all three big credit reporting agencies). That code indicates your account's current standing. Accounts from zero to 29 days past due are a Code 11, the code for current accounts. The codes for reporting late payments start with accounts that are 30 to 59 days past due.

This doesn't mean it's a bright idea to take your time with your credit card payments. Your card issuer still can charge a late fee as soon as you miss the due date, and you'll also have to pay interest on the amount due. You might also get hit with an interest rate hike.

What's considered a late mortgage payment?

Most mortgage lenders have a grace period of about two weeks during which your payment will be accepted without any kind of penalty. You'll have to call your mortgage lender to ask what your grace period is.

How do late payments affect your credit score?

Your credit score is safe if you get your payment in before that 30-day mark. Any later, and your score could be in trouble. There's no set amount your score will drop, as the extent of the damage depends on several factors including:

  • Your current credit score
  • Your previous payment history
  • How late your payment was

You have the most to lose if you've built a high credit score and haven't had any late payments in the past. For example, if you have good credit, one late payment might not give you bad credit. But a credit score of 780 with no prior late payments could drop by 110 points with just one credit card marked 30 days past due. As you exceed 60 and 90 days past due, your score suffers more.

If you have a lower credit score to begin with and a couple of late payments on your credit report, then another will likely bring your score down another 60 to 80 points. And every late payment makes it harder to improve your credit score.

How long do late payments stay on your credit report?

Late payments stay in your credit history for seven years, but this doesn't necessarily mean one will continue affecting your score for that long. The impact of every negative item on your credit report diminishes over time. Recent activity (the past two years) is most heavily weighted. If everything else is more or less the same on your credit report (no more negative data), your score will start its rebound within about six months.

By the way, some accounts may not show up on all of your credit reports. Creditors are not required to report to each credit bureau separately, so some only report to one or two. The credit reporting agencies don't share data, so if a late payment doesn't show up on one of your reports, it probably won't (unless it goes into collections).

How to handle late payments

The best way to deal with late payments is to avoid them in the first place. There are only two reasons for a late payment: You're short on funds or you simply missed the due date. If it's the former, then you need to revamp your financial habits, because the longer you leave credit card debt unpaid, the larger your balance will grow.

It's easy to have a credit card payment slip your mind, especially if you use multiple credit cards to maximize your cash back or rewards. Setting up automatic payments on all your cards is the most effective way to avoid this.

Should you miss a due date, what matters most is making the payment right away. You'll prevent any credit score issues by getting the payment in before it's 30 days delinquent. Even when it's been longer than that, the sooner you pay, the sooner you can stop the bleeding.

If it's your first missed payment with a card issuer, you should also give the lender or credit card company a call. Here's why. Besides the hit to your credit score and a possible late payment fee, there's one other important potential cost you might face -- a penalty rate on your credit card. Some issuers will convert your account to a very high interest rate if you violate certain terms and conditions. A late payment might qualify.

The credit card provider may be willing to give give you a break the first time around. Ask the creditor to waive the late fee and remove the late payment from your credit file and keep your current interest rate. This favor is almost never granted a second time. Consider it a secret weapon to protect your score in the event of a rare flub. To avoid a repeat, set up an automatic payment that covers the minimum due each month.

A late credit card payment can hurt your wallet and your credit score, so it isn't something to take lightly. But if you get it paid within 30 days and take steps to avoid it in the future, the worst-case scenario is a late fee that your card issuer may take off your bill anyway.

Our Personal Finance Expert