Sometimes, life happens. Maybe you went on vacation and forgot to send off your credit card payment before you left, or you did send it off (you swear!), but it was lost in the mail. Or, you just flat-out didn’t have enough money to pay a bill, so the late notices are piling up.
When that happens, you may be wondering how far your credit score will drop, as the payment becomes 30, 60, and then 90 days later – or more.
The answer is, like so many questions in life, “It depends.” However, we do have some factual information and a few guidelines to go by.
For instance, we do know that paying on time is a major factor in how our credit scores are calculated. In fact, according to FICO, payment history makes up 35% of your credit score.
That being said, there is some gray area when it comes to the credit score damage a late payment can cause.
Here are five factors that help determine just that:
- Was it a 30, 60, or 90-day late payment?
Missing a payment’s due date by 30 days is the first huge milestone that will affect your credit, but continuing to miss that payment by 60 and then 90 days will impact your score even further. Remember that credit reporting is all about gauging risk (for potential lenders and creditors). So while a 30-day late may be explainable as a mistake, oversight, or one-time error, 60 or 90-day lates show that you are really in a financial freefall. Therefore, your score will drop accordingly, so you should definitely avoid a 90-day late payment if you want to save your score.
- How long ago was the late payment?
Credit scoring algorithms also factor in recency – how long ago the late payment took place. So if a 30,60, or 90-day late just hit your credit report this month, your score will drop a lot sharper than if the same late payment occurred five years ago. But that also means that as time goes on (and you continue to make your payments on time) the negative scoring
- Was it just one account with a late payment – or more?
If you’ve only missed a payment with one credit line, loan, or account, it will damage your score a lot less than if you’ve missed payments over multiple accounts.
- What type of credit account did you miss a payment for?
Of course, the credit reporting algorithms give more weight to more important loans, like mortgages, etc. over smaller ones, like a $250 store retail card. Therefore, a 30-day late payment on a mortgage loan will hurt your score a lot more than with smaller and lesser accounts.
- How long have you had that account?
Accounts that are well seasoned – that have been open and in good standing or a long time – will take less of a hit than newer accounts. So, avoid missing payments on that brand new credit card!
- What was your score before the late payment?
Believe it or not, the BETTER your credit was before the late payment, the MORE the late will hurt your score! Are you be punished for having a great score? NO; but the credit bureaus are gauging risk, and a late payment that’s out of character for a high-scorer is more alarming than the same late for someone who commonly makes credit missteps.
A 30-day late on your credit report will probably result in a credit score drop of around 80 points IF your score was originally around 680 or so. But if your score started out at 780 or higher, one late payment could send your score plummeting by 90-110 points!
However, if you’ve missed a payment, there are some ways to do damage control. Immediately contact your creditor and work out a payment, and you can even ask them to delete the negative blemish on your credit if and when you pay.
But different lenders report on different days of the month, so you may get lucky and prevent them from even reporting a 30, 60, or 90-day late. Again, you definitely want to avoid paying 90 days late on any accounts, as that will cause significant damage to your credit – and stay on your report for seven years!
The good news is that Nationwide Credit Clearing is here to help you clean up your credit and improve your score! Contact us if you have any questions about late payments or for a free credit report and consultation!