How Much Will A Late Payment Affect Credit Score?

How Many Points Will My Credit Score Be Affected If I Pay My Loan A Few Days Late?

Credit standing is also an important factor in the approval of loan facilities and credit cards. Banks and other creditors consider it as an indicator of how you will ensure you meet your obligations for borrowed funds. The first aspect that affects your score the most is your history of payment. If you fail to pay your dues on time or even if you start delaying payments then it can bring your credit score down. But just how much harm can one delinquency cause? Below, are a few changes you can expect and how to reduce the effects of each:

The Immediate Impact

Whenever a lender sends a 30-day alert to the credit bureaus, this information may be included in your credit reports by Equifax, Experian, and TransUnion. This delinquency will cause your credit score to drop, and this will be reflected in the report. A single recent late payment can lead to a score decrease of up to 110 points as the Experian credit bureau has reported. That’s not a good and instant blow that can significantly decrease your likelihood of being approved for more credit or loans.

The level your score reduces depending on one or several late payments is usually connected with your initial score. Those with a very good or an excellent rating have the greatest distance to drop. For instance, a person who earns a score of 780 will have a deduction of about 100 or so if he or she pays a bill 30 days behind. On the other hand, a person who has a score of 620, for instance, may only have their score reduced by 50 to 75 points for the same offense.

Why Does One Late Payment Matter So Much?

Some of the things that you may be thinking about are how a single payment that is only delayed by one month can affect your credit score so badly. There are a few reasons why late payments are viewed as major red flags by both lenders and scoring models.

Payment History Is Highly Important: Payment history over the period is one of the most important scoring factors since it shows responsibility. A FICO credit score is calculated with about 35 percent of it being determined by whether or not past payments were made on time. Thus, from the very beginning, one missed payment cancels a significant amount of points in this important category.
Increased Future Risk: If you fail to make payments, or if you start making late payments, lenders consider you to be at a higher risk of not making the payments in the future. This reduces the scores because their confidence in your future reliability has been affected.
Disrupts Length of Credit History: Regular payments also have a long history, which positively affects credit scores. A 30-day late payment breaks that cycle, effectively starting it anew. It is now calculated from that new delinquency onwards rather than from the number of years that one has been paying without defaulting. This lowers average account age parameters which are used in scoring models.

How Long Does It Stay On Your Credit Report?

The first effects of a single late payment are short-term, which means that they are felt in the initial phase of the delay but are soon overcome. The late payment is likely to reflect your credit report for the next seven years from the time it was first reported to a credit agency. But, credit scoring models do place much more reliance on recent information as compared to older data.

The negative impact on the credit score is also gradual, as the payment ages increase in the later years. Benchmarked against the first year, typically the worst drop is seen in the first year. After 6 months to a year, the pressures might reduce to slightly lower levels. But full recovery can take up to a few years for people with very good scores.

If you have FICO, then having a 30-day late payment is excluded from your score once it is 2 years old. Remember that even though you have seven years to make the payment, it will still be reflected on your credit report in full. Other credit scoring models may keep on penalizing your credit score from this delinquency up to the 7-year mark, albeit at lower rates.

Is It Possible to Delete Late Payments on Credit Reports?

Given that late payments make such a difference, why not request the credit bureaus to delete them? However, the credit bureaus do not remove accurate information from the reports upon a consumer’s demand.

However, there is a provision for you to challenge any erroneous late payments reported on your credit. For instance, if a lender submits that a payment was due 60 days and you have other records that indicate this was not true, then you can challenge such information. Produce copies of the bills, bank statements, or any other proof. The burets will open an investigation and if the late payment was reported in error or cannot be verified, it can be deleted.

The Late Payment: How to Rebuild Your Credit

This means that a single late payment that results in a score drop of 50-110 can be very discouraging. Thankfully there are some steps you can take to rebuild your credit fairly quickly after a one-time slip-up.

Get Back on Track: Ensure that any other payments are made on time from now onwards. This way, people will avoid human errors such as forgetting to make the payment or missing the due date altogether. A strong pattern of on-time payments can negate that one 30-day delinquency that is flagged as detrimental to your credit score.
Pay Down Balances: Leaving balances at max hurts concerning late payment complications. Reduce outstanding balances on credit cards and other revolving credit to decrease credit utilization ratio. Ideally, it should not exceed 30 percent on each of the cards. This can help increase the scores at a later date.
Limit New Credit Applications: Every time you apply for credit and credit reports are conducted for new credit, the score drops slightly. Do not take the habit of opening many new credit cards or loans at one time during the period your score is low. To many new accounts at once also appears dangerous.
Call and Negotiate: Sometimes, a simple inquiry with your lenders and any creditor that reported that late payment to the credit bureaus will allow them to remove the negative entry from your reports. There is no assurance but they might give you the favor of withdrawing the delinquency, most especially if you are a longtime customer.
Request Goodwill Deletions: In writing, send a letter to your credit card companies and other lenders politely asking for the goodwill deletion or goodwill adjustment. These require creditors to delete the negative items that do not depict the usual payment behavior. If this is approved, then the delinquency can be removed from your reports, which may mean you lose up to 100 points or more.
Improve Mix of Credit: This means that it is not only preferred to have credit cards but also types of credit such as real estate, car, and student loans (that are well managed). That, together with time, can improve scores relative to having only credit cards on the credit reports.

It also helps to sign up for Experian Boost which allows you to pay your phone, TV, and Internet bills as well as streaming services on time to report a positive payment history each month. Registering for free reporting programs like this which give you good credit information along with your reports usually helps in increasing credit scores gradually.

It can be overwhelming to try to rebound from a one-month credit card payment delinquency or other negative record. But now that you know why one late payment matters and how long it takes to rebuild your score you are now well equipped to manage your expectations. It enables one to monitor his or her actual progress by using free credit tools to check your score. Most people get their scores back up within 6 months to a year once cleaning up their reports and get better with their credit habits.

Ready to boost your credit score? Call +1 888-804-0104 now for the best credit repair services near you! Our expert team is here to help you achieve financial freedom and improve your credit. Don't wait—get started today!