It finally happened, the payment due date on your credit card came and went and you didn’t send it on time. It doesn’t really matter what the reason was – short on cash, on vacation, or just mentally out to lunch – it is now a late payment.
So the questions start to swirl around in your head. Will this show up on my credit report? If so, when? How will it affect my credit score? Will I ever recover? How much is this going to cost me?
You have every right to be concerned because, beside the nasty little late payment fee charged by the credit card company, you may have some bigger issues to deal with. First, it’s important to know what actually happens when you make a late payment.
When a Late Payment is Not a Late Payment
Fundamentally, a late payment is a payment you fail to make before the due date. It doesn’t matter if the payment is a day late or a month late, the creditor will charge you a late fee the minute the due date passes. That’s money you didn’t expect to spend, so it does sting.
However, just because the creditor lashes you with a late fee doesn’t mean your life is over. If you are worried about the late payment ruining your credit, you may still be in the clear. It all depends on just how late the payment is.
Credit card companies don’t publish their timelines for reporting late payments. Some creditors report late payments on credit cards immediately but that doesn’t matter because the credit bureaus don’t consider a payment delinquent until it is 30 days past due.
As long as your payment is made before the 30th day, it won’t be recorded as delinquent. If your payment is made on the 29th day, your account will be reported as “current and in good standing.” However, on the 30th day it will be recorded as a “late” payment.
If you are more than 60 days late, it will be recorded as a “missed” payment, which is much worse for your credit standing. In addition, your creditor may not only charge you another late fee, it may start charging you a “penalty” interest rate until you make six months of on-time payments.
A 90-day late payment is even worse. Being 90 days late with a payment could be detrimental to your credit. Even if you bring your payments current, the incident will remain on your credit report for seven years – though your accounts will show as being current.
How Does a Late Payment Affect My Credit Score?
One late payment can lower your credit score significantly. Your payment history is given the biggest weighting – 35 percent of your credit score – by lenders.
However, with late or missed payments, time has a way of healing your credit. As time passes, the impact of the blemish on your score will diminish. Older late payments on credit cards are not given the same weight on your score as fresh late payments. What makes it worse is, if you otherwise have good credit, you could see your score drop further than if you had poor credit prior to the late payment. The takeaway is your score will eventually recover but you should do everything you can to avoid repeating the mistake.
Can I Get a Late Payment Removed From My Credit Report?
If you have a long history of on-time payments with your credit card company and you typically maintain a reasonably low balance, there is a chance you can get a reprieve. Under those circumstances, some creditors would certainly consider reversing the late fee if you ask. Reversing a late payment on your credit report may not be as easy, but it is worth trying. Here are three approaches you can take:
Ask for Forgiveness
If you have had a good relationship with your creditor, it may consider a one-time “goodwill adjustment.” You write a letter explaining your circumstances and why the payment was late. You ask for forgiveness and request that they adjust your credit report.
Make a Deal
In some cases a creditor might consider adjusting your credit report if you agree to sign up for automatic payments. It’s a good deal for the creditor because it can count on timely payments in the future, and it’s good for you because you don’t have to be concerned about another late payment.
Dispute the Late Payment
If you have a way to show that an error was made in the way your payment was recorded, you can dispute the late payment. You should never just make something up though. If there is a real inaccuracy in the way your payment was recorded; the creditor will likely make the adjustment.
How to Prevent Late Payments
One late payment is not going to end your credit life as you know it. However, between the nasty late fees and the additional damage to your credit, it is not in your best interest to let it happen again. Here are some things you can do to ensure it doesn’t:
Rearrange Your Due Dates
You can ask your creditors to change your due dates according to a schedule that works best for you. You may be better off with due dates that fall on or near your pay dates. You may want the due dates staggered, so some fall on different pay periods. Figure out your budget and cash flow then schedule your due dates accordingly.
Set Up Automatic Payments
Whatever the reason you had for avoiding it before, it’s not worth risking another late payment. All credit card companies have an automatic payment option. If you are afraid of not having enough money in your checking account when the payment hits, schedule it on or just after a payday.
Set Up Text Alerts
If you don’t want to use automatic payments, you can set up a text alert to remind you of a payment date.