In a world governed by automatic payments, few people verify that their banks are, in fact, paying their creditors. Unfortunately, bank issues, identity theft or even a simple error could result in missed payments. Mailed payments are even less secure since this method depends upon the reliability of the postal service.
Paying a debt a few days late doesn’t affect your credit rating. After 30 days, however, your creditor will likely report the delinquency to the credit bureaus. Although a missed payment can deal a heavy blow to your credit scores, the damage is easier to recover from than the damage dealt by other derogatory entries, such as collection accounts and defaulted debts. If you’re lucky, you may even succeed in having the missed payment removed from your credit report altogether.
Credit Scores Can Drop Considerably After Missing a Single Payment
The credit scoring formula that the Fair Isaac Corporation uses to calculate your FICO scores is a trade secret. As a result, there is no surefire way to determine just how much your credit scores will suffer when you miss a payment to one of your creditors. Generally, the higher your credit scores are, the more damage a late payment causes. For example, an individual with a poor credit rating may only lose 50 to 60 points after missing a payment. An individual with excellent credit, however, could lose double that amount.
The Longer You Wait to Pay, the More Your Credit Suffers
A 30-day late payment deals a crushing blow to your credit scores, but failing to catch up on your debt immediately can make matters worse. If you don’t make payment arrangements quickly, a mere 30-day late payment notation will quickly morph into a 60 and then 90-day late payment. Not only do additional missed payments wreak havoc on your credit rating now, they will continue to hurt you in the future. Lenders that might be willing to overlook a single 30-day late payment may not look so favorably upon a 60 or 90-day late payment notation. A series of missed payments indicates that you lack reliability and are a greater lending risk than someone without a past history of late payments.
How Long Do Missed Payments Affect Your Credit Score?
Like most negative entries on your credit report, late payments will remain there for seven years. The good news here is that the credit bureaus place greater importance on recent items. As the late payment ages and is replaced by timely payments each month, the degree to which it damages your credit decreases. If you practice financially responsible behavior and never miss another payment, your credit scores can recover in as little as two years.
Removing Missed Payments From Your Credit Report
Sometimes creditors mistakenly report a payment as late when it actually arrived on time. If you know you did not pay your bill late, contact the creditor and explain the situation. Be prepared to provide documentation of the payment, such as a canceled check or list of automated deductions from your bank account, in order to verify that the late payment was added to your credit history in error.
Creditors will sometimes perform a one-time adjustment of an account–deleting a late payment notation–for consumers with previously unblemished payment records. You can request an adjustment in writing or over the phone. If you are successful, the missed payment will disappear from your credit history and your credit scores will recover. This strategy is most effective if your credit report only reflects a single 30-day late payment. Creditors don’t generally delete a 60-day or 90-day late payment unless the entry is a genuine error.