5 myths about late payments and your FICO scores

You may be surprised to discover that some of the things you 'knew' about missing a payment -- or even being a day late -- just aren't true.

By Money Staff Dec 5, 2013 3:10PM

This post comes from Rob Berger at partner site Credit.com.

Credit.com on MSN MoneyRecently I had the opportunity to interview Tom Quinn on my weekly podcast.  Tom is the credit expert for Fair Isaac Corporation, the creator of the FICO credit score, and he also is a former contributor to Credit.com. There are few people who know more about FICO scores than Tom.

Woman with paperwork © Getty ImagesThe interview yielded a number of surprises when it comes to that all-important three-digit number. Perhaps most revealing were Tom’s comments about how late payments affect your FICO scores. He crushed several myths surrounding late payments.

Keep in mind that consumers have more than one credit score. In fact, you have many credit scores. Tom’s expertise here speaks specifically to FICO scoring models, though some of the myths apply to other scoring models as well. What’s important are the basics of good credit.

Payment history is a vital part of a consumer’s credit scores, so we debunk five of the most pervasive myths about late payments.

1. The one-late-payment myth

One prevalent misconception is that a single late payment is no big deal. The reality is that on-time payments are the single most important factor in the FICO formula. Research conducted by FICO shows that a single 30-day late payment on a mortgage can shave 75 or more points off of a consumer’s credit score. In addition, late payments remain on a credit report for seven years. As a result, what may at first seem insignificant can have a major affect on a FICO score.

2. The seven-year myth

As significant as even one late payment can be, don’t give up hope. As noted above, a late payment remains on a credit file for seven years. The effect that late payment has on a FICO score, however, changes over time. The FICO formula considers the recency of a late payment. In other words, a late payment in the past six months will be more severe than a late payment five years ago. So like fine wine, it gets better over time.

3. The 30-day myth

A frequent question in credit forums is whether a payment a few days late will get reported to the credit bureaus. Some have mistakenly claimed that payments must be at least 30 days late before they affect a FICO score. In truth, a creditor can report a payment that is even one day late. In practice, however, not all do. As a generalization, late payments on revolving accounts such as credit cards tend not to get reported until they are 30 days late. In contrast, late payments on installment loans like a car loan generally get reported sooner.

Keep in mind that these are generalizations, not rules. Furthermore, creditors can and do level late payment penalties, regardless of whether or when they report the payment as late.

4. The late-is-late myth

Another common myth is that all late payments are created equal, regardless of how late they are. This myth can cause some people to delay making their payment, thinking 30 days late is just as bad as 90 days late. The truth is, FICO scores factor in the severity of the late payment. A 90-day late payment is more severe than a 30-day late payment. Don’t get lulled into inaction by the myth that all late payments are the same. They are not.

5. The number-of-late-payments myth

The fifth and final myth is that the number of late payments is not a significant factor. Late is late, some believe, and whether one is late on one payment or five is not a meaningful factor. The FICO scoring models look at the number of late payments on a credit file. One late payment may reflect a simple oversight, but five late payments potentially reflect a more serious financial problem.

The key is to appreciate just how significant late payments are to the FICO score.  Payment history is the single most important factor, making up 35 percent of the FICO formula.

More from Credit.com:


Dec 5, 2013 10:29PM
Dec 5, 2013 8:39PM
credit card companies can go blow a goat... you would think a person who owes nothing would have a great credit score but in reality you have to have an open account and keep making payments on time to have good credit in their eyes. they just want the juice to keep running...
Dec 5, 2013 9:25PM
credit scores are the biggest scam out there. All of the agencies and credit reporting are an agent to charge people more money to obtain credit
Dec 6, 2013 12:31AM

Wouldn't it be nice if consumers could screw over the creditors the way they screw us?  I pay my bills on time but I have bad credit all due to mistakes made by my creditors. I used to go thru the rigamarole of getting my credit reports every year and constantly fixing all the wrong info in them. Many of my "creditors" never even bothered to contact me in an attempt to collect or allow me to dispute - they just reported nonexistent charges to the agencies. No, not fishy at all....  Got them all removed too so it can't be just me getting ripped off in this manner.

At one point I actually started getting offers in the mail that used a strange combination of my maiden name and former married name - neither of which I've used in over ten years. Found out one of the credit reporting agencies just willy nilly changed my name!  Nightmare trying to get that fixed!  Simply because ONE creditor (never found out who) reported it to them makes it true and I have to jump thru hoops to prove my own name.  What nonsense! 

I don't care anymore and haven't bothered looking at my reports for a few years now. I can't even imagine how crazy it must look.  But I'm never going to own a home and I only need credit cards with fairly low limits for traveling purposes (try renting a car, booking a hotel room or buying an airline ticket without one). I would love to be able to collect info on creditors detailing their ridiculous, harmful mistakes and somehow have all that negative info used against them for a change.  Wishful thinking...

Dec 5, 2013 10:58PM
...Shackles - we are slaves to money and credit - until this changes, we will never be free -
Dec 6, 2013 4:32AM

This is more credit score and credit card insanity- the credit and FICO industries really have the American public firmly around the neck. 75 points of your score for ONE late payment??! Are you kidding me?? Listen, I am not a dead beat, I am not a rich Joe Blow, I'm a regular old hard working American doing my best to make it through- and time after time my worth is measured by my credit score- whyohwhy?? I do not advocate nothing in place to set some sort of standards for lending/credit, but FICO is a huge monster and growing, and business has embraced it as a way to gouge many a citizen out of their hard earned money.

Business does like it's rich and FICO perfect customers, but it loves its middle class and poor FICO score customers even better. You can't charge a perfect FICO score high interest rates, extra fees, higher payments, but you sure can do it to the lesser guy- and that's another avenue for big profits to come in. FICO has become a "legit" way for business to swim with the sharks- they can't help it, FICO demands it.

I have a perfect driving record, and at 50 have never had an accident. Do you think I get the best rates? No, my FICO score determines I am a bad, bad driver and at high risk for ramming my car into a loaded school bus at 110mph.

This country sucks.


Dec 6, 2013 8:46AM

we were actually told by someone in financing that you will never win on this whole credit score scam. If you pay off your credit cards & close them your credit score goes down. Too much credit your credit goes down. Too little credit no financing from anyone. On & on & on.

I paid off my cards anyway & closed them. Who cares. I took the hit & beat them at their own game. Haven't had anything but a car payment since. Put $10,000 down on that. It's amazing how the car salesman jump around when you wave that kind of cash! My car payment for a 2012 KIA Sorento: $200 a month.

My advice: Do not skip the 1st month the finance company "graciously gives you" start payments immediately the next month. Pay $10-50 over requested payment every month. Pay at least 10 days before due date. More will be applied toward principal than the interest. THEY HATE THAT! Almost all of our $200 is being applied toward principal NOT INTEREST! Gives me a damn good feeling every month.

Now if I could just save that 20% for a down payment on a house...............................

Dec 6, 2013 10:38AM

What a joke.  The industry that brought this country to it's knees is telling us how to handle our finances.  Nothing but a bunch of rip-off artists.  Credit score scam and the government lets them do it.  Government for the people, I don't think so.


Dec 6, 2013 11:04AM
When we can successfully sue credit rating agencies for snooping and reporting erroneously,  I'll put stock in them.
Meanwhile,  they are nothing more than cheap extortionists,  paid informers,  and blackmailers.
There has to be greater accountability,  especially because the buyers of their information count it so heavily.

Dec 6, 2013 1:33AM
Our info is out there it only takes time before people steal everything from us then we have to prove we are the victom of fraud. The only person who is safe from fraud is obamas wife. credit score is a joke we are in prison. Now I do have great credit but at 1 time it was real bad for me. I spent over 15 grand to sue false reports while I was in the army. S/S numbers are given out like candy in the army so theft will come. Our gov abuses S/S numbers remember why S/S numbers were for but now they are for everything. Now I have life lock no im not a paid member. Also I put locks on my credit from all 4 credit companies before any credit is given they have to call me to confirm every thing. Its funn how now a bad credit score is 650 at one time that was the best score ever. But now the score is rising why is that. So in 20 years your score must be 9000. to have a good score. Credit is a scam. But we need it to buy a car a house or health care costs. What a shame
Dec 6, 2013 10:56AM
Credit Bureaus as we know them only exist in the USA.  Created by the Chamber of Commerce, the agencies bully good people with unorthodox and many times illegal proceedings.  I am happy for the new Consumer Affairs Agency that will yank the chains of these bully dogs.
Dec 6, 2013 10:47AM
If you have the money available, make the payment, pay the bill - ON TIME!!!  If you can't, contact the creditor right away and explain your situation.  It may NOT help, but it CAN'T hurt.  Keep your credit and payments in line and on time and you'll be fine.  Stay on top of your credit and there will be less chance of identity theft.  No guarantee, but it lessens the probability.
Dec 6, 2013 1:54AM

Making your payments as they become due is a true virtue even if there is very little cash left.

As late fees are avoided, and interest on paid debts is not accrued, a bit more cash will be left

in the wallet or purse.

Dec 5, 2013 11:08PM
Tom Quinn can go **** himself... AND Ron Berger!!!!!!
Dec 6, 2013 11:51AM
Does anyone have suggestions on how to determine "credit-worthiness" without use of the "credit bureaus"?  Would you lend money to strangers without having an idea of what your risk will be to give the loan?  How would you know this person will pay the loan back?  And, is the degree of risk you are taking in giving the loan justification for granting the loan?  If anyone has a better idea, please share it:<)
Dec 6, 2013 11:29AM
How important is your “credit-worthiness” to you?  Remember that the creditor has NO desire or benefit to resolve an issue that is in THEIR favor.  And, they will argue and fight to keep the status-quo.  If they are willing to fight for the profit of a mistake, shouldn’t you?  The complacency and passivity of the citizens of our nation is one of the biggest reasons for our nation’s state of affairs.  Taking our nation back starts – WHERE?  AT HOME!!!  Take active, control of your own life and your own affairs and it will begin to show in the attitude and practices of the entire nation.  We are ALL and “Army of 1”, fighting for our own rights and the rights of a nation.  If you accept accountability for your own decisions and actions, insist the same from others – be it your creditor or the President of the United States of
Dec 6, 2013 11:14AM
It's a hassle, but be assertive with your creditors/credit card companies when a snafu happens.  Some will tend to treat you in a bullish manner.  If they get abusive or inappropriate with there language, tell them you want to speak to their supervisor.  If they refuse to do that, it is time to write a letter and begin documenting your efforts to resolve the situation.  A few years ago we discovered that a company was debiting our bank account for a service we had distinctly refused.  It had been a particularly busy summer and we didn't notice it until six months after they began debiting our account.  We contacted our bank and the company and within hours we had the money back in our bank account.  It wasn't though without the need to become assertive and show the proof we had indeed declined the  service we were being charged for.  Now this was a reputable company that had done this.  However, if we hadn't noticed the extra charges, it would have gone on and on until we did.  Don't expect someone else to spot and resolve errors or discrepancies.  You/I have to take that responsibility on or we pay the consequences.  And, if you become aware of a shady practice by any company, report it to the Better Business Bureau, which is generally a division of your state's Attorney General's office. Yes, its a hassle, but so is dealing with the ramifications of doing nothing.  Don't be victims of nefarious actions by others, be survivors and deal with directly the issues/abuses - YOU'RE WORTH IT!!!.

Dec 6, 2013 12:17PM
I try my best to pay on time. Hard sometimes.
Dec 6, 2013 12:12PM

I use debit, and have any loans, such as car loans etc, directly pulled from set accounts.

Hence, I need no stinking FICO score tips, nor your 'revolving'  credit cards.  Take your score for a HIKE-O.


Dec 6, 2013 1:05PM
Aside from trying to borrow money without a good credit score you may find that you pay more for rent, auto insurance, health insurance, a host of other things, and have trouble establishing utility accounts.
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