Making a late payment on your credit card, mortgage or loan can hurt your credit scores and affect your overall credit health.
Whether you are just three days late or 30 days late, not paying your bills on time could affect you for months and potentially years to come.
Effects of late payments
Payment history is one factor banks and lenders consider when evaluating your credit risk and deciding whether or not to approve you for credit. A long-standing history of on-time payments suggests that you have a healthy relationship with lenders as a borrower; a poor history of on-time payments may suggest that you may have trouble paying your loan, and extending credit to you could result in a loss to the lender.
Being unreliable with payments is a red flag to credit card providers, lenders and even utilities, and several things can occur when you pay late.
- You’ll usually 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 for credit cards, that will be reflected on your next billing statement. If you continue to miss the due date, you can incur additional late fees.
- Your interest rates may rise: This may happen for cards with promotional APRs. If you have a promotional 0% APR on a balance transfer or purchases card, paying late could be a breach of your credit agreement, and it may mean you forfeit your 0% promotional rate and the card will be reset to the standard interest rate – costing you more in interest.
- It may end up on your credit reports. If your payment is late, the credit reference agencies are usually notified, meaning the late payment will show up on your credit reports. A late payment on your credit report could stay on your credit report for six years.
- It might decrease your credit scores. Payment history information is an important factor in calculating your scores. Just one late payment can lower your credit scores.
Paying late is a dangerous credit habit that could lead to more damaging credit actions, such as neglecting an account until it goes into default. A defaulted account may remain on your credit report for up to six years and cause even more damage than a late payment.
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 scores can increase the longer the delinquency.
If you’ve made a late payment recently, you could attempt to:
Work on arranging a repayment plan. If you’re late on your credit card payments, you can try to call your credit card provider to try to work on a temporary payment arrangement or a payment holiday.
Request removal of a late payment marker. You can request a correction from your credit card provider if you had a good reason for the late or missed payment, and you’re now up to date. One example may be due to a bank error in making the payment on time. But keep in mind there is no guarantee that the lender will agree to remove the missed payment from your credit history.
Pay all accounts on time. If a late payment caused your credit scores to drop, the best thing you can do is to continue on-time payments on all of your accounts. After a few months of consistent on-time payments, your credit scores could slowly improve. An easy way to prevent late payments is to set up direct debits on your financial accounts and email or text reminders for yourself for important bills.
Finally, keep track of your overall credit health by checking your free TransUnion 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 good credit history and improve your credit scores over time.