I made a credit card payment that took over two weeks to come out of my account. It was returned for insufficient funds, but it hasn't been 30 days yet. How can I make this not affect me negatively?
- NBL
Dear NBL,
Payment history is the most important factor in credit scoring, so you are correct that being late on a payment can negatively impact your credit scores. That said, it shouldn't be reflected in your credit history unless you are at least 30 days past due. However, your credit card company may assess late fees as soon as you miss the due date,
What to Do If You Miss a Payment
You stated your payment was returned for insufficient funds. If you rectify the situation quickly and make your full payment before it is 30 days late, you can likely avoid having the delinquency reported to the credit reporting companies. However, missing the due date and having a check returned still can be a very costly mistake.
In addition to charging you a late fee, your credit card company may also charge a fee for the returned check, plus interest on the revolving balance. All these fees add to your credit card balance, which can make it harder to pay down that balance and keep up with future payments. Additionally, your bank may charge an overdraft fee. All those fees can add up quickly.
The most important thing you can do now is bring both accounts current as soon as possible. If you haven't already done so, contact both the credit card provider and your bank to explain what happened, and make arrangements to get both accounts back in good standing.
When Are Late Payments Reported?
Any time a payment ends up being 30 days or more past due, the lender will likely report that delinquency to Experian. 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 the 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.
You can learn more about how to improve credit scores on our blog.
Thanks for asking,
Jennifer White, Consumer Education Specialist
This question came from a recent Periscope session we hosted.
