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Making a late payment on your credit card, mortgage, or loan can lead to several negative consequences that can ultimately sink your credit score and damage your credit health. Whether you are just three days late or 30 days late, not paying your bills on time will affect you for months and potentially years to come.
Effects of Late Payments
Banks and issuers consider payment history an indicator of risk when deciding whether or not to approve you for credit. A long-standing history of on-time payments suggests that you are a responsible and reliable borrower; a poor history of on-time payments suggests that you may not repay debts and could result in a costly loss to the bank or issuer.Being unreliable with payments is a red flag to financial institutions, and several things can occur when you pay late.
- You will be charged a late fee. If you pay your credit card bill a single day after the due date, you will be charged a late fee as high as $35, which will be reflected on your next billing statement. If you continue to miss the due date, you will incur additional late fees.
- Your interest rates may rise. Paying your creditors late may result in an increase in your interest rate, often resetting your interest rate to the Penalty APR. For credit cards, the penalty APR can be as high as 29.99%, which means you'll pay significantly more in interest on your outstanding balance. If you have a promotional 0% APR on a balance transfer credit card, paying late may forfeit your 0% APR and reset it to the default interest rate.
- It will be reflected on your credit report. If your payment is more than 30 days late, the three major credit bureaus will be notified and the late payment will show up on your credit report. A late payment on your credit report will stay on your credit report for seven years.
- It will decrease your credit score. Payment history comprises nearly 35% of your credit score, making it one of the single most important factors in calculating your score. Just one late payment can drastically lower your credit score, especially if you have a good or excellent credit score. For example, a 30-day late payment can hurt your credit score by up to 80 points if your score is in the 680 range, and up to 110 points if your score is in the 780 range. Depending on how late your payment is, how frequently you pay late, and what your credit score is, late payments can severely affect your credit. To simulate how a late payment may impact your own credit score, try Credit Karma's's free, interactive Credit Simulator.
Paying late is a dangerous credit habit that could lead to more damaging credit actions, such as neglecting an account until it becomes delinquent or sent to collections. An account in collections will remain on your credit report for seven 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 score increases the longer the delinquency.
If you've made a late payment recently, you can attempt to do the following:
- Remove a late payment fee. If you were charged a late fee for a late credit card payment, but are generally a good customer, get in touch with your issuer's customer service line or online chat service and request to have the late fee forgiven and removed. If you are in good standing with your issuer, they are more likely to compromise.
- Reset your penalty interest rate. If a late payment caused your interest rate to increase, your issuer is required to reset your interest rate back to the pre-penalty rate if you make six months of on-time payments, so get back on track and start making on-time payments.
- Pay all accounts on time. If a late payment caused your credit score 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 score should slowly improve. An easy way to prevent late payments is to set up automatic payments and email or text reminders on your financial accounts so you never miss another payment again.
Finally, keep track of your overall credit health with Credit Karma's Free Credit Report Card, which gives you a letter grade on your on-time payment history and other important credit score factors. Paying on time every month is the single best way to build good credit history and improve your credit score over time.