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Late Payment

How Long Does a Late Mortgage Payment Affect Your Credit?

It happened—you've missed a mortgage payment. Maybe because the due date slipped your mind or you're in a rough spot financially. A missed mortgage payment isn't the end of the world, but there are repercussions to keep in mind, including credit score harm: A late mortgage payment could stay on your credit report for up to seven years.

Fortunately, though, you can take steps to prevent a late payment from happening again and rebuild your credit after making late payment. Here's what you need to know about late mortgage payments and your credit.

How Does a Late Payment Affect Your Credit?

How a late payment affects your credit depends on several factors, including the type of credit score involved and your overall credit history. Here are some typical outcomes of a late payment:

  • A late payment could remain on your credit reports for as long as seven years and hurt your credit score the whole time.
  • A late payment will cause a more severe decline in your credit score if you have an excellent credit score versus a poor one.
  • Missing several payments in a row will damage your credit more than missing only one payment. And notably, missing several mortgage payments could result in foreclosure, which is one of the most damaging negative marks on your credit.
  • Late payments on several accounts can do more harm than a late payment on just one account.

Over time, the effect of a late payment on your credit fades. If you responsibly make on-time payments on all your debt obligations going forward, you could see your credit scores bounce back to where they were before you missed a mortgage payment.

When Do Late Payments Show Up on Your Credit Report?

A late payment appears on your credit report when you've gone at least 30 days past the due date. You might face penalties if you miss the due date by even just one day, but a late payment won't harm your credit if you bring your account up to date before the 30-day window closes. Cross that 30-day threshold, however, and you can expect to see the late payment reflected on your credit report within a month or two of the late payment being recorded.

Do Mortgage Payments Have a Grace Period?

Grace periods on mortgages vary from lender to lender, but normally last about 15 days from your due date. So, let's say your mortgage payment is due on the first day of each month. If you've got a 15-day grace period, you'd be given until the 16th of the month (or the first business day after that) to make your payment without being penalized.

Now, if you end up paying after the grace period ends, you could be hit with a late fee of 3% to 6% of your monthly payment. So, if the fee for making a late payment is 5% and your monthly mortgage payment is $1,500, you'd be zapped for an extra $75.

The consequences can be much more dire if you continue to miss payments.

If you've gone three consecutive months without making a payment, the lender might list you as being in danger of foreclosure and notify you that it plans to move ahead with foreclosure in another 30 days.

After 120 days (four months) of missed payments, the lender may initiate the foreclosure. If foreclosure comes to pass, the lender will take possession of the home and you'll be forced to move out. Additionally, the foreclosure will be reflected in your credit history, which can further drag your scores down and make it much harder to be approved for another mortgage in the near future.

How to Avoid Missing Mortgage Payments

To avoid the penalties that accompany missed mortgage payments, follow these four tips to help keep yourself on track:

  1. Set up alerts and reminders. If you're the forgetful type, calendar notifications can be a useful reminder that your mortgage payment is due.
  2. Arrange automatic payments. Just be sure you'll have enough money in your bank account each month to cover the payment. You may be able to set up automatic payments through either your bank or your lender, so be sure to first explore which option works best for you.
  3. Stay connected. If your lender has an app, download it so you can more easily track and pay your mortgage.
  4. Look for help if you need it. If you missed a payment because you're struggling financially, mortgage relief programs and other options are available to help. Ask your lender if it offers forbearance, which could enable you to make temporarily reduced payments or to pause payments altogether if you're dealing with a hardship such as job loss. You might also qualify for a loan modification program that may, for instance, lower the interest rate or extend the period for paying off the loan. That could lead to more manageable monthly payments. If you're still not sure what to do, contact a local housing counselor. You can find one in your area by visiting the website of the U.S. Department of Housing and Urban Development (HUD).

In the wake of widespread financial instability caused by the coronavirus pandemic, mortgage lenders and the government are offering assistance to those affected, including foreclosure protection. Learn more about what's available here.

How to Recover From a Late Mortgage Payment

If you've made a late mortgage payment, don't let it get you down. There are a number of things you can do to get your credit back in shape:

  • Pay all of your bills on time, in addition to your mortgage. Payment history makes up 35% of your FICO® Score , so a long history of on-time payments help undo credit damage caused by a missed mortgage payment.
  • Stay on top of your credit utilization ratio. This ratio compares the total amount of credit available to you with the amount of credit you're using. A lower ratio is better. Typically, it's best to ensure your utilization ratio stays under 30%, but the lower, the better. Credit utilization constitutes 30% of your FICO® Score.
  • Bring current any past-due accounts. Late payments will continue to drag down your scores if they keep piling up. If you've already missed one payment, bring an account current before another late payment is added to your credit history.
  • Call for backup. When you're running into trouble paying your mortgage or other bills, it might be worthwhile to visit with a certified credit counselor, work out a debt management plan to wipe out your debt or take out a debt consolidation loan.

The Bottom Line

If you've missed a mortgage payment or fallen behind on payments, you're not alone. The good news is that if you act quickly, you can avoid any late fees and any damage to your credit. But if a late mortgage payment shows up on your credit report, monitor your credit report and your credit score going forward, and take steps to ensure all of your bills are paid in full and on time every month.