You’ve come back from a family vacation only to open your mail and see a late notice for your auto loan payment. You may even start to get a few calls from collection agencies about a cable bill you completely forgot to pay for. Whatever the situation is, the effect of a late payment really depends on a few factors.
The length of the delinquency plays a major role in how bad a late payment will hurt you. If you are behind on your payment by 1-2 days, you will have nothing to worry about. Surveys and studies show us that most accounts do not go into collections until they are over 30 days past due.
Although your lender may charge you a late fee and some penalties, they are unlikely to report a late payment until it hits the 30-day mark. Some lenders also take the borrowers payment history into account. If you have been a good borrower and have been making payments on time in the past, the lender could let you slide on a 30-day past-due bill with some fees.
Prepare for the worst
What do you do if the lender or creditor decides to put a negative entry in your credit report? If you see a negative entry, there are some things you should ask yourself:
- How delinquent was the payment?
- When was the most recent payment you made?
- Are your other accounts delinquent as well?
If you have a track record of making payments on time, then one single delinquency should not hurt your score too severely. In a bad situation, however, you may even see your score drop as much as 100 points due to a late payment. Late payments can also stay on your credit report for as long as 7 years.
If you do not have the money to pay for the past-due bill, your best bet is to call your lender and negotiate a repayment strategy in exchange for having the negative entry removed from your credit report. You can also write a letter of “goodwill removal”, simply asking the creditor to remove the delinquency from your report.
If you have a high credit score, you will actually feel the sting of a delinquent payment more than a consumer with a bad credit score. Consumers with high credit scores will see a more dramatic hit on their credit scores than consumers with bad credit. Remember, consumers can get up to 3 credit reports for free from the government mandated website www.annualcreditreport.com.
If you are behind on a large number of payments and don’t know where to turn, CrediReady can help. Our nationwide network of attorneys can give you a 100% free bankruptcy consultation to wipe out all of your debts for good. If you haven’t already, join the 100,000+ consumers that filled out this free no-obligation form to speak with their free local attorney today.