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It's best to avoid late payments on your loan and credit card payments because they can hurt your credit and cost you in fees. Potential consequences can vary with how many days past due your payment is. A payment that's just a few days late, for instance, may simply result in a late charge from your creditor. More serious repercussions can result when a payment is severely past due.
If you slip up and miss a payment, taking these steps can help minimize the damage.
What to Do if You Miss a Payment
As soon as possible after realizing you've missed a payment deadline (or learned a payment hasn't gone through), take the following steps to help minimize the damage:
- Submit the required amount using the speediest method available. In most cases, that will be an electronic payment made online or by phone. If you do so within less than 30 days of the due date, your credit scores won't be affected but a late fee will likely be triggered.
- Contact your creditor ASAP. Once you have confirmed that payment has been made, contact customer service at the lender or credit card issuer and explain that you missed a payment but have set things right. If this is a rare occurrence for you, a polite (apologetic) request could persuade the service rep to spare you a late fee. If it's 30 days or more past the payment deadline, your payment will be considered delinquent, and will likely be reported to the national credit bureaus (Experian,TransUnion and Equifax).
- Keep an eye on the late payment's impact on your credit. If a delinquent payment has already been reported to the credit bureaus, there's nothing you can do to prevent it from appearing on your credit reports and having a negative impact on your credit scores. (You have the right to dispute inaccuracies on your credit reports, but accurate information cannot be removed.) To hopefully prevent additional harm to your credit, redouble your efforts to avoid late payments in the future, and consider taking steps listed below to help rebuild your credit over time.
- Reassess your payment method. If you still make payments by paper check, you should seriously consider switching to electronic payments. Slow mail service is unlikely to make you 30 days late on any bill payment, but it could make you miss a due date and rack up late fees.
When Are Late Payments Reported?
Anytime a payment is made 30 days or more after its due date, the lender will likely report it as a delinquency to the credit bureaus. Once a late payment is reported, it will remain part of your credit history for seven years.
Late payments have a significant negative impact on credit scores because lenders view them as a sign of financial distress. If your account is reported as past due, the best thing you can do to help your credit scores recover is to bring the account current and ensure all your accounts are paid on time going forward.
The more recent a late payment is, the greater its impact on scores. If you use credit responsibly and keep your accounts current and your balances low, as time passes that late payment will affect your credit scores less and less.
How to Improve Your Credit After a Late Payment
Here are some tips for improving your credit scores and avoiding future missed payments.
- Use autopay. If you're confident you'll have adequate funds in your checking account each month, consider setting up automatic electronic payments on your loan and credit card bills. Card issuers typically let you choose between making the minimum required payment and paying the full balance on your last statement. Paying only the monthly minimum will ensure you don't miss a payment, but doing so will increase how long it will take to pay off your balance and result in costly interest charges.
- Try Experian Boost®ø. Consider enrolling in Experian Boost, which lets you expand the payment history on your Experian credit report by sharing information on recurring expenses such as cellphone and utility bills, streaming service subscriptions and eligible rent (if you pay it online). Using Experian Boost can increase FICO® Scores☉ that are calculated using your Experian credit data.
- Reduce high credit card balances. High balances on credit card accounts (and other forms of revolving credit) can raise your credit utilization rate. This measures the balance on your credit cards as a percentage of the account's borrowing limit—above about 30% can hurt credit scores. If that's your situation, paying down these high balances could bring credit score improvement quickly. Individuals with the highest credit scores tend to keep their utilization ratio below 10%.
The Bottom Line
Making a habit of paying your loan and credit accounts on time is prudent and can spare you serious negative consequences. Making a payment even one day late can cost you a hefty penalty, and allowing 30 days or more to pass without making a scheduled debt payment can hurt your credit scores significantly. Steady timely payments, on the other hand, will promote steady growth in your credit scores—growth you can track yourself by regularly checking your FICO® Score for free through Experian.