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 impact of one late payment on your credit score 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.
One late payment and your credit score
What do you do if the lender or creditor decides to put a negative entry in your credit report for late payment? 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 late payment should not hurt your credit score too severely.
How much does one late payment hurt your credit?
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. One late payment on your credit report won’t serve as a massive red flag to lenders unless this has been a common theme.
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.
What to do if you miss a payment
Check your credit report
Remember, consumers can get up to 3 credit reports for free from the government mandated website www.annualcreditreport.com. Checking your credit report consistently is one of the most effective ways of seeing how much one late payment impacts your credit score.
Your credit report will include all late payments from the last 7 years. If you spot an error in your credit report you do not recognize, be sure to file a dispute with the credit bureau that reported it.
If one late payment shows on your credit report, it should not cause a large issue when it comes to securing lines of credit in the future. If a future lender asks you about the late payment, inform them that it was only a single day late.
Check Your contract
If you have missed a late payment, chances are the contract you signed for that line of credit includes clauses on late or missed payments. For example, a one-day late credit card payment should not cause your card issuer to report a late payment to the major credit bureaus. However, the card issuer could limit your access to credit until a full payment is made.
However, some entities are more aggressive with reporting one day late payments than others. If you bought a car from a Buy Here Pay Here dealership, they may repossess your car after being late on a payment by one day.
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