How Much Does One Late Payment Affect Credit Score?

Late payments are a negative factor that impacts the credit score, so you may be wondering how much one late payment is going to hurt.

Credit scores are a very important factor in financial lives. It affects your ability to be approved for new credit cards and loans, as well as the interest rates that you will be charged. That is why maintaining and reconstructing credit is such a crucial matter. A question that crops up frequently in consumers’ minds is, “How much does one late payment cost a credit score?” Although one late payment may not significantly affect your score, it will still have a negative impact. In this post, we’ll discuss how much one missed payment can hurt your credit and what measures can be taken to reduce the damage.

The 30-Day Rule

The majority of the creditors also update the credit bureaus of your payment status monthly. Hence, if you are one month late on your payments but make the payment the following month, it may never be considered as having been made in arrears. But if you fail to pay your bills beyond thirty days after the due date, then federal law compels the creditor to report you as a delinquent debtor to the credit reporting agencies. If you are 30 days and beyond when it comes to paying up your bill then you are likely to feel the pinch in terms of your credit.

How Many Points Does One 30-Day Lateness in Payment Lower Your Credit Rating?

The majority of credit scoring models are arranged in such a way that one late payment within 30 days would only affect the score slightly. If a person has never missed a payment and has several positive credit histories, one missed payment can decrease the score by a mere 10 points, or up to 50-60 points. Again, the extent to which credit scores may be affected by one late payment will depend on the initial rating; the decline may be stiffer for those who had a bad rating initially.

However, the actual drop may vary depending on the scoring model you have chosen and the specifics of your credit history. For instance, a credit profile with a rich credit history and low credit utilization may be reduced by 20-30 points for one 30-day payment delay. But if you have limited open accounts, one late could reduce your thin credit file by 50 points or more.

What Lies Beyond the Score: Long-Term Consequences?

Though you may overcome the 30-day late payment one day, it may affect your credit for several years. If you have been a victim of late payments, remember that they will reflect on your credit reports for the next 7 years. But even if your score bounces back within a year or so, lenders can reject your new credit application if you have a recent late payment on your record.

Notably, several late payments within a closely related period present even more significant risks to your credit health. When you fail to make several payments across different accounts, this points to a bigger problem. It shows a higher credit risk that may discourage lenders for several years.

Reduction Of Impact When One Pays His Bills Late

Ideally, you’ll never have a late payment at all in your credit history. But mistakes happen, so here are smart steps to take if you do miss one payment.

• Pay ASAP: As soon as you come to this knowledge that the due date has passed, make that payment as soon as possible. This gets you back on track and ensures that the 30-day tardy does not get reported to the bureaus.
• Call Your Lender: In case of such a situation, you should talk to your creditor or the loan provider directly. They might decide to forgive the lateness and not charge the overdue amount or they may decide not to list the delinquency on the credit report. Especially with the current pandemic and the economic climate, there are many courtesies given by lenders.
• Ask Creditors To Report $0 Balance: If the late payment does get reported, then the next month, kindly request your creditor to report a $0 balance on that same account. This informs the supplier that you have cleared the balance and are up to date on any payments. If no balance gets reported the record of late payment has little impact on the determination of your scores.
• Send Goodwill Letters: Send your creditors ‘goodwill letters’ explaining that this was the first time you were late in paying your bill. Remember you have otherwise cleared all accounts at the right time. Humbly ask them to delete the negative item from your credit history. Creditors are normally willing to have the late payment removed from your reports if you request so through goodwill letters.
• Give It Time: You can also monitor your credit reports and scores monthly to determine the extent of the effect of the late payment. In the worst-case scenario, it requires 6-12 months of positive credit history to counter the harm. Responsible opening of accounts or reduction of credit utilization can also help raise the numbers more rapidly, it seems. Ensure you pay your dues on the due dates no further late payments are reported while you are rebuilding your credit score.

A single missed payment does not define the health of your credit. But it is better to know the ramifications and do something to be in a positive direction once again. By doing so, you change one 30-day late payment from being a big issue that hinders your progress to just another small blemish that can easily be overcome.

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