We have all been there before, a late payment on one account or another. It happens, oversight, short on cash, whatever the reason, it has happened. Or maybe you are one of the very few and very lucky to not have been late, ever. Regardless, you should know what and how late payments may effect your credit and credit score in the short term and long term. It is fair to say that not all creditors report late payments to your account, or report a debt at all. So in most instances timing is everything.
Factors To Consider
There are factors that you can take into account when you are late, or think that you may be late in a payment and how that will impact your credit score.
- Your Patterns of Payment
- Your Current Credit Score
- How Late are You
- Impact on Future
1. Thirty Days Behind
Now, there is no law that requires that a creditor list your account with the agencies or that they even report you delinquent. But, they do. As a general rule, 30 days late is the starting point in the late cycle. So, if you do not make the required payment within the 30 days in which you are late the probability is high that your creditor will report you late on your credit report.
2. Will Your Score Go Down
It depends, there are many factors that go into a credit score, and late payments are only one of them, so to say that your score will be dramatically impacted by a late payment or two is a stretch, but if it begins to be a pattern, or if you have other issues that are creating an overall picture of bad debt, then the factor that can and may push you over the edge is your late payments and the degree of how late they are. Are the 30, 60, 90 or more late. Certainly the more delinquent you are, the more and more it will impact your score each month.
3. Late Payments that Are Fine
It should be noted that any late payment is potentially bad, but some are less problematic than they may seem, such as utilities, or cell phones. Some of these companies do not report late payments until the account become severely delinquent, usually past 120 days. This is not to say that your score will not be impacted, because probably you are late on most of your other bills too, so this may only be the tip of your financial issues, but if you are caught in one of those cash flow and timing issues, a few late utility bills should not hurt your credit in any major way.
4. How Late
How late are you will depend on the creditor and their reporting habits. For instance, you probably have a grace period, in which time a creditor will not even consider you late, late enough to bother reporting, due to the administrative lag time on the account, overhead and lack of resources it is not economically feasible to report this late status. However, once you go past the grace period, and get into the 30, 60, 90 day range they will most likely report your late status to the credit agencies. Or in severely delinquent account even transfer or sell your account of to a collections company. Collection companies on the other hand are designed to report late payment and to entice you to pay on time and catch up your accounts, once you have moved into this category it may be to late to rectify the payments with your original company.
As you move into these delinquent stages your credit score will be severely impacted and you will see a rapid decline in your credit score. Your only remedy is to pay the balance and stop the bleeding. But remember, you have the power to negotiate your account, so in an effort to get you to pay, you may be able to ask them to remove the bad information off your report and to make your account reflect a current status.
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You want to look at your overall history on your credit reports, take a look at your prior history and the patterns of payments. See what your current score is, and see if it has been impacted by the late payments, as you may be able to slide when it comes to the grace period. Some accounts that you are late on may not even be showing up on you credit report, and those may be the ones you can play the float on in the future if you are in a pinch. As with anything, not being late is always preferable, but if you must, chose your accounts wisely.