How late payments can affect your credit score

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Life happens.

Sometimes that means you have to prioritise other expenses and make a late payment on your credit card or other loan. Or maybe a bill simply slips your mind. No matter the reason, we know that missing a payment isn’t a good feeling — especially since it can affect your credit score.

Read on to learn about how late payments on a credit card or loan can affect your credit health and what you can do if it happens to you.

What happens when you make a late payment?

It depends on how much you owe and how late your payment actually is, but there’s no getting around it: late payments can hurt your credit score.

If you can, pay off the overdue account in full within 30 days of missing the payment. If the account continues to go unpaid for 60 days, you could see another negative impact to your score. And after 90 days, your account might be defaulted and sent to collections, which will continue to have a negative impact on your overall credit health. Some lenders will be more strict than others when it comes to defaulting an account – so if you miss a payment, it’s a good idea to speak to your lender and check your credit agreements so that you can prioritise getting back on track.

Here are some things you might encounter after making a late payment on a credit card or loan.

  • You could be charged a late fee. If you pay your credit card bill a single day after the due date, you could be charged a late fee, typically £12, which will be reflected on your next billing statement. If you continue to miss the due date, you can incur additional late fees.
  • Your promotional APR may end, meaning your interest rate could  rise. If you have a promotional 0% APR on a balance transfer credit card, paying late may also forfeit your 0% promotional rate and reset it to the default interest rate. If you’re transferring a balance from another card to a new balance transfer card, you should know that you’ll have to keep to the terms of the old agreement as well as the new one, or you could find your promotional rate for the new card is withdrawn – just as you start paying on it.
  • It may end up on your credit report. If your payment is more than 30 days late, the three major credit reference agencies are usually notified, meaning the late payment will show up on your credit report. A late payment could stay on your credit report for up to seven years.
  • It might decrease your credit score. Payment history information is one of the single most important factors in calculating your score. Just one late payment can dramatically lower your credit score for over a year, especially if you have a very good or excellent credit rating. Depending on how late your payment is, how frequently you pay late, how much you owe, and what your credit score is, late payments can really affect your credit health.

The consequences of making a late payment can feel harsh. But don’t let it discourage you from working toward future financial goals. Your credit score can bounce back with time, hard work and patience. The best thing you can do is start working on rebuilding your on-time “payment streak” if possible — even if that means only making the minimum payment each month, and overpaying when you can, without risking your ability to cover the payment next month. Making more and more on-time payments and actively reducing the amount you owe can diminish the impact on your score over time.

And, as best you can, don’t let future payments slip until the account defaults, and gets sent to collections. A defaulted account could stay on your credit report for over six years and cause much more damage than a late payment.

Why do late payments impact your credit score?

Payment history is one of the key details that banks and lenders consider when deciding whether or not to approve you for credit.

A poor history of on-time payments suggests to banks and lenders that you may not repay debts and could result in a costly loss to their business.

Because of this, payment history is one of the most important factors that goes into calculating your credit score. So when you miss a payment or make a late payment, it can have a more dramatic impact on your score than something like a hard search.

What to do if you’ve made a late payment

If your bills are past due, the sooner you can pay the bill, the better. The damaging effect of a late payment on your credit score can increase the longer you wait.

If you’ve made a late payment recently, here are some things you can try.

  • Request the late payment fee is waived. If you’re in otherwise good standing with your bank, or if it’s your first time missing a payment, consider asking your bank to waive the late fee. They may do this as a gesture of goodwill.
  • Pay all accounts on time. If a late payment caused your credit score to drop, the best thing you can do is to continue making on-time payments on all of your accounts. After a period of consistent on-time payments, your credit score could improve. An easy way to prevent late payments is to set up automatic payments and set up email or text reminders for yourself about payments on your financial accounts.

Finally, keep track of your overall credit health by checking your free credit report on Credit Karma. We break down the factors that can affect your score, so you can keep an eye on your payment history along with other important areas. Paying on time every month could help you build a positive credit history and improve your credit score over time.