Helen Hecker asked:
Of course you don’t want to make any late payments on your credit cards or loans and affect your credit report and score unless you absolutely have to, but what happens if you’re unable to avoid it? It all depends on whether you’re 30, 60 or 90 days past due. If it’s only one late payment you may be able to dispute it and get it removed from your credit report but if it’s more than one that may be difficult to do. And it depends on whether it’s currently past due or long term past due, and other factors.
Understanding how FICO credit scoring works for late payments will help you avoid late payments and understand which late payments will show up for the long term and which payments won’t.
Put simply, FICO credit scores are used by credit card companies, loan and mortgage companies, utility and insurance companies etc., to predict how reliable you’ll be as a customer and how much they can trust you make the payments.
If you’re 30 days late on a payment it will affect your credit score only when it’s reported to the credit bureau. The same applies to 60-day late payments. However these are considered short term and may not cause any lasting damage to your scores. If this happens over and over then this will not be the case. Also a one time late payment of 30-60 days may never be reported to the credit reporting agency. You can avoid a lot of worry by finding out if the creditor reports a currently 30 or 60-day late payment or not. Many do not.
If you’re 90 days late it’s another matter. This can damage your credit report and score for seven years, unless you can get it removed. If it was in error or you had some special circumstances and your credit history has been good then it is worth a try by writing a letter to the credit report company. The three main credit bureaus are Experian, Equifax and Trans Union.
Credit card companies and other creditors look at 90-day or 120-day late payments as a red flag. They can no longer trust you to make your payments on time so your credit score will go down. Their purpose is to determine whether you’ll be able to make your payments on time or at least before 90 days have passed. It doesn’t matter if the payment was for $25 or $1000, they will look at it the same way.
Also sometimes late payments may cause a rise in the interest rates on your credit cards.
If you can avoid making any late payments you’ll dramatically improve the scores on your credit report. And if you haven’t gotten your copy of your personal, annual, free credit report online yet then get one now. Study it and then find out how your current creditors look at late payments. Call them up and find out if they report a 30 or 60-day late payment to the credit reporting agency.
Best of all find some emergency ways to completely avoid making any late payments. Try making your payments online a few days early to avoid payments getting lost in the mail. If at all possible find things you can sell or do some small part-time work from home and try to make a small emergency fund.
Do anything you can to avoid making a late payment. But if it happens, make it as soon a possible so it doesn’t go into a 90-day problem. Ninety days is the point where it’ll be difficult to turn things around and seriously affect your credit report and score and future borrowing opportunities. It’s best to spend a little time learning about credit reports, how you can fix or repair your credit report and scores now and how you can raise your credit scores fast. You may be doing some things you had no idea would cause your scores to drop.
