Late payments on your credit report can have varied effects depending on how late they are and how frequently they are late. Most credit scoring systems are focused on trying to predict whether or not you will let your accounts go past 90 days late. Late payments are also factored in at about 35% of your credit score, so the effects can be detrimental in certain circumstances.
• How are late payments factored into my credit?
• How does this affect my overall credit report and FICO score?
• Can I remove late payments from my credit report?
Late payments are generally reported as 30, 60, 90 or 120+ days late. Usually, a 30 or 60-day late payment only temporarily drops your FICO score for the reported period if this is a non-recurring incident. A 90-day late payment is where long-term problems can happen. Just one 90-day late payment (or later) can show up for 7 years on your credit report. If you continue to miss your payments beyond 90 or 120 days, the following negative items may appear on your credit report if your creditors seek out alternative action:
- Collections
- Judgments
- Tax Liens
- Settlements
- Foreclosures
- Repossessions
While it is ideal to avoid making late payments altogether, it is best to avoid making any payments later than 60 days past the due date. Anything later can have similar effects to a bankruptcy, foreclosure, etc. If you already have 90-day or later payment, make sure the information on your credit report is correct, and dispute it if it’s not. As an alternative, you could always try writing a “goodwill letter.” Some companies, as a measure of customer satisfaction, will remove the late payment as a gesture of “goodwill.” Worst-case scenario, the late payment will be on your credit report for 7 years.
Late payments are not necessarily deal breakers. There are certainly ways to avoid them, and there are ways to attempt to remedy them. However, if managed poorly, they can have a tendency to lower your FICO score an inhibit your ability to receive low rates on financing, options for financing, and your overall borrowing power.