Your credit score is a vital part of your financial future. A number of factors determine this score. Besides your outstanding debts and other aspects of your credit history, timely payment of dues is one of the major factors contributing to this score. This means that missing a payment is not good for your credit score. And once a late payment goes on your credit report, it’s likely to stay there for at least 7 years. Here are a few things you should know about late payments and how you can tackle them.
When is a late payment reported?
A late payment it is usually noted on your credit report if you skipped an entire billing cycle, which is generally 30 days. As per federal law, it cannot be reported to the credit bureaus until you have exceeded 30 days past the due date. However, if you overlooked a bill but managed to pay it within 30 days after the due date, it won’t hurt your credit score. As long as you make the payment before the 30-day mark you’re safe.
There are certain late payments which are not reported to credit bureaus at all. For instance, if you’re late on your cell phone or utility bill payments, they won’t be noted on your credit report, unless you have completely defaulted on the account.
When and how does a late payment affect your credit score?
The moment a late payment comes up on your credit report your score takes a beating. This is because your payment history constitutes 35% of your credit score. So, even a single late payment reported to the bureaus can cause your score to drop by several points. If you continue to miss payments in the consecutive billing cycles, your credit score is likely to sink faster. Late payments are often a sign of financial trouble. They make you a high risk borrower for lenders. This can make borrowing much more difficult in future.
Is it possible to remove a late payment from your credit report?
Sometimes there may be errors in reporting. If this is the case, you can dispute the error and ask your lender and the credit bureau to have it removed from the report. You can provide proof of payment to show that payment was made on time. However, if a late/missed payment has been accurately reported, it will stay on your credit report for seven years.
How can you avoid late payment?
Some lenders allow you to select the payment due date to work with your payday. You can avail this option to pay the dues comfortably each month. You can also set up calendar reminders or text alerts to remind you a few days before the due date. Also consider setting up automatic payments from your account. This way you can never miss a payment. Take complete control of the situation and never let your credit score suffer.