How late payments can affect your credit

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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

Banks and issuers consider payment history 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’re 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’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 in the area of $25 to $35, which 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. Paying your creditors late may result in an increase in your interest rate, often resetting your interest rate to a penalty (or default) APR. For credit cards, the penalty APR is often as high as 29.99%, which means you’ll pay significantly more in interest on your outstanding balance if it’s triggered. If you have a promotional 0% APR on a balance transfer credit card, paying late may also forfeit your 0% promotional rate and reset it to the default interest rate.
  • It may end up on your credit reports. If your payment is more than 30 days late, the three major credit bureaus 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 seven years.
  • It might decrease your credit scores. Payment history information typically accounts for nearly 35% of your credit scores, making it one of the single most important factors in calculating your scores. Just one late payment can drastically lower your credit scores, especially if you have good or excellent credit scores. Depending on how late your payment is, how frequently you pay late and what your credit scores are, late payments can severely affect your credit.

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 may 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 scores can increase the longer the delinquency.

If you’ve made a late payment recently, you could attempt to do the following:

  • Request removal of a late payment fee. If you’re in otherwise good standing with your bank, consider getting in touch with it and requesting that the late fee be forgiven and removed.
  • Work to reset your penalty interest rate. If a late payment caused your interest rate to increase, your issuer is generally 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 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 automatic payments and email or text reminders on your financial accounts.

Finally, keep track of your overall credit health by checking your free credit reports on Credit Karma. We break down the factors that can affect your scores, 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.