Sometimes late payments happen. Perhaps you went out of town and forgot to post or mail your payment before your trip. Or maybe times are tough and you’re having trouble keeping on top of your bills. And if it’s neither of these instances, it could be an error made by the creditor.
Whatever the case, late payments can ruin your credit standing. You’ll want to do everything you can to avoid having one. While you might only be charged a small late fee if you’re a few days late on your payment, it’s indeed much better than letting fees accrue and having the situation spiral out of control.
When it comes to really late payments though, your creditor – whether it’s the phone company, electric company, mortgage company, the lender for your auto loan, or any other service you pay for monthly – will usually give you a grace period at a minimum of 30 days after the due date of your payment. After that, they will report it to the credit bureau.
Other creditors and lenders will hold off until the payment is 60 days past due before reporting you to the credit bureau. This is why it’s very important to know what the terms are before you sign any contracts. If you’re unsure, you can look up your creditor online to view its policy or call them to speak to a representative that can tell you more.
So at the very least, you have 30 days to get your payment processed. And at the very most, you’ll have 60 days. Never assume though. Always find out the policies and try to get your payment in as soon as possible to avoid trouble.
Do you think you have a late payment? Keep reading and I’ll tell you how that will affect you and what steps you can take to repair your situation, plus much more!
How to know if you have a late payment on your credit report
Unless you’re behind on your current bills, you won’t know if any other past credit collections have been reported to the credit bureau. If you check your mail regularly or view all your accounts online, you’ll likely be very well aware if you’ve missed a payment or are late.
But problems can and do arise from things of the past. For example, you could have forgotten to pay something in college. Or you could be the victim of identity fraud where someone has used your name and social security number to establish a line of credit. Simple errors can also lead to late payments being reported on your credit report.
There’s only one way to find out for sure if you have a late payment on your credit report. This is especially important if you are up to date on all your current bills and payments. You will want to check your credit reports at AnnualCreditReport.com. This checks all three types of credit reports at once.
It takes little time to look and it can give you great peace of mind. If you see something on there that’s a mistake, then you can ask to have it removed and fix your credit. For example, if a company you’ve never done business with has reported you with a late payment, you can dispute that and restore your credit. The same goes for if you legitimately made a payment and it wasn’t recorded, leading to the indication that you were late on your payment.
Again, the only way to know for sure is to check against all three credit reports. If you spot nothing wrong, then you can breathe a sigh of relief. If you have payments coming up that you might struggle to make due to hard times, like losing your job, you can call up your creditors and they will work with you to help you make manageable payments until you get back on your feet which is infinitely better than having late payments build up and mess up your credit standing.
Will a partial payment keep your payment from being reported late?
You might think that sending whatever you have can help prevent any late fees from being reported, but this isn’t a good idea, at least not without talking to your creditor first. You don’t want to just send in a partial payment of the minimum due because it won’t stop them from reporting at as late or sending it to collections.
It is worth a shot to request a little more time to make the payment, but you may incur additional fees. If your situation is only temporary, it might be worth it though in lieu of wrecking your credit. As with anything in life, it never hurts to ask. Keeping your credit strong can help you take care of some of your bills too until you get out of the red so think of it that way too!
What are the monetary penalties that come with it?
As I said, late payments generally won’t make it onto your credit report until you’ve been 30 days late. But that doesn’t mean it will go without consequence. Most creditors will impose late fees for a tardy payment. Some of those creditors will do it the instant it’s marked as late. So, assuming your payment is due on the first of the month, and you put it through at midnight on the second day of the month, you might have an additional late fee. Other creditors are more lenient in this regard. Again, it really helps to know the company’s policies for these things first.
When your payment hasn’t been made, and you are now 60 days late, especially when it comes to credit cards, the credit card issuer may apply the designated penalty rate onto your balance with each month, usually until you’ve paid six consecutive payments on time. But while that rate might go back to normal for the old balance, any purchases you made after that penalty rate was applied may be subjected to higher interest rates. It all depends on the credit card you have and the terms of the legal agreement that binds you to the card. What’s more, that penalty rate can also be added to other accounts you share with the same credit card company.
Let’s say you pull yourself out of the red and get back on your feet. If you catch up and make that full minimum payment before the next due date, your reported account status to the credit bureaus will reflect that your account is fully current. But that previous 30-day late payment will be on your credit report for the duration of the credit reporting time limit – a very lengthy seven years!
While that’s not ideal, what’s worse is missing the next payment. When you do, a 60-day late payment gets tacked onto your credit report. It snowballs from there with 90-day, 120-day, 150-day, and 180-day late reports. If you get to 180 days late, your account will likely be defaulted or even charged-off. You do NOT want this to happen. Don’t bury your head in the sand like an ostrich. You should make sure to bring your account current before this happens. Because once it does, there’s no chance to catch up on your payments or move your account into good standing. It gets closed up and your status is reported, lowering your credit significantly.
How significantly, you might ask? Keep reading and I’ll break it down for you.
How long do late payments stay on your credit report?
As I said, those late payments stay on your credit report for seven years. That doesn’t mean you can’t buy anything like a house, a car, or get anything with credit again though. You may incur higher interest rates when taking out a line of credit until this time passes. Also, if you get a loan on a new car for example, and you make those payments on time, this reflects well for you and helps you rebuild your credit.
When you prove yourself over time, that credit score will start to rise over time. Plus, you can even get that late payment from your past permanently deleted. I’ll tell you how to do that in the following paragraphs.
How do late payments affect your credit score?
Late payments don’t all have one way of impacting your credit score. It all depends on the situation at hand. There are some basic rules though that can help you figure out what you might be in for when you have a late payment.
For starters, the longer the delinquency of payment is, the bigger negative consequences you’ll have on your credit scores. That means that in most cases, a 90-day late payment will tank your credit score more severely than a 30-day late payment.
Another thing that will have an effect on your credit score is how many payment delinquencies you have. If you have just one and all your other payments are up to date with every creditor you deal with, then the impact will be less. Conversely, the more delinquencies you have, the lower your credit score will be.
Also, your delinquency will have the strongest impact when it is first reported to the credit bureaus. But as time goes by, that impact decreases. If you make things right, this should set things straight and set your credit to grow in a positive direction again.
Life happens and sometimes you make late payments either because it slipped your mind or something was going on like the loss of a job, or even a natural disaster. In these cases, there are things you can do to help your situation. Keep reading for tips on what to do to help turn your credit around.
How to have a Late Payment Removed From your Credit Report
Thankfully, there are ways you can get a late payment removed from your credit report, but it will take some work from you to make that happen. Read through here to see what you can do to set your credit record straight.
1. Write a ‘Goodwill Letter’
One of the first things you should think about trying is writing a letter to your creditor letting them know why you couldn’t make that payment on time. It’s a sign of goodwill, hence the name of the letter. Creditors aren’t required to report this information to the credit bureaus though so this might not help at all. You can’t be sure they’ll update your account.
If you had a situation where you realized your payment was due and it simply slipped your mind, call the creditor in question immediately. As long as you’ve made the payment and you have never before been late, many creditors will be forgiving for the first slip-up.
2. Try Pay-for-Delete Services
Debt collectors often have a service called ‘pay-for-delete’ which they offer to have collections remove from your credit reports. They promise they’ll do so if you pay off the account. However, this is something I don’t recommend at all. The reason? Creditors are required to report accurate information and they won’t agree to remove any negative information unless that information can be proven to be an error that wasn’t yours. In other words, it’s better for you to save your money and make the dispute on your own.
Something else to consider here is that when you make this arrangement, it may remove the paid collections off your credit reports, but it will not take away the original late payments. Even if your reported late payments are not of your doing, using these services isn’t a good option.
3. File a Dispute on that Late Payment
So, what if you did everything right on your end but you have a late payment? You can try to get it removed, but if you haven’t been successful, you should deal directly with the credit bureaus. It will take a little work from you though but will be worth it. You should check all your past statements to ensure all the details from date to payment amount are correct. You can trace it back through your bank too to prove you made the payment on time.
Once you do, send a hard copy of a dispute letter to all of the credit bureaus (that would be Equifax, Experian, and TransUnion). It will take about 30 business days to get a response. If you’re low on funds and can’t afford to hire someone, or you have the time to pursue the research involved to prove that they made an error, you can turn things around this way.
4. Hire a Pro
The final route you can take is to hire a professional service to help you successfully dispute the late payment in question. Credit repair firms are filled with legal professionals that have this type of training and can help bring your credit back into good standing. Most of them offer free consultations so you can see what costs will be associated with the help you need. I recommend this option if you have no time to pursue the research on your account or you have the money to throw at the problem. Also, if you feel doubtful in financial matters, it’s great to have someone that knows what they’re doing to help you out.
How to avoid or limit credit damage from late payments?
In an ideal world, we would be on time with all our payments, but sometimes things happen. When they do, the best thing you can do is try to get your account status current as soon as you can. Remember, 30 days late isn’t good, but it’s much worse to go 60 days. It’s even worse to go 90 days. Or beyond. You get the idea.
The sooner you catch it up, the less damage your credit will suffer. Then you can move forward making timely payments, while your credit score grows again.
Also, don’t forget to prevent any late payments on your accounts which will also add a mark to your score plus add late fees.
We have so many things to keep track of, and I don’t know about you, but if my head wasn’t attached to my neck, I’d forget it half the time I walked out the door. So, here are my favorite tips to help you keep current and avoid this situation in the future:
– Choose your payment due dates. Most companies allow for this and you can set all your bills to be due at the same time, or stagger them to be due after you receive your paychecks.
– Use text alerts. When you set these, they will remind you a few days before your bill is due. You can also set them up to give you multiple alerts like a snooze button does for your alarm.
– Sign up for automatic payments. This is a great option because you never have to remember to pay your bills. You should, however, be sure you have enough money in your account or you’ll receive overdraft fees. With credit cards, it’s important to be vigilant too with the monthly payments. Sometimes, your spending will be larger, like if your air conditioner breaks or you have some other unexpected expense. If you keep enough in your account though, it won’t be a problem.
Conclusion
Trust me when I say you want to avoid having late payments at all costs. They can end up costing you much more in late fees, plus if you are past 30 days, it will usually be reported. Some companies will allow for 60 days before they report a late payment, but you really don’t want to take that chance, do you?
If you follow my tips above, you should be able to keep yourself out of trouble. Avoid splurging on too many things with your credit card for this reason. And if you’re going through a tough time right now, keep your chin up and know there is a light at the end of the tunnel and you’ll get there soon!