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How much can one late payment hurt?

Whether single delinquency impacts your FICO credit score a little or a lot all depends on your individual circumstances.

By MSN Money Partner Jun 12, 2012 1:32PM

This post comes from Gerri Detweiler at partner site Credit.com.

 

You open your credit card statement and discover you forgot to make last month's payment. Or you get a call from a collection agency about a medical bill you didn't realize hadn't been paid. Or you check your credit reports and discover a late payment is marring your otherwise perfect payment history.

 

Image: A man holding a check book (© Image Source/Getty Images)How bad is it? How much does a single late payment affect your credit scores?

 

Of course, as with so many things related to credit scores, the answer is, "It depends." But the irony is, the better your credit, the more you may feel the sting.

 

Hope for the best

If you're lucky, the lender won't report that you were late. "The first thing to note is that most lenders do not report missed payments until the account is 30-plus days past due," says Anthony Sprauve, the director of public relations for MyFICO.com.

 

"Suppose a given credit card payment is due on May 15th (and) the payment is made on May 25th. Technically the payment is late, and fees and interest charges may apply. But in most cases, this late payment would not be reported by the creditor to the credit reporting agencies."

 

Or it's possible your lender may overlook for the transgression. Steve Ely, the president of eCredable.com, adds: "The larger creditors (like credit card companies) usually have sophisticated analytic models working behind the scenes that take into account your history of payments. If you've been paying on time for a long time, they're likely to forgive your one late payment, and let it slide." (Post continues below video.)

But brace for the worst

What if you don't luck out and the late payment is reported? These three questions will help you understand the possible impact, according to Barry Paperno, the community director for Credit.com:

  1. How long ago did the most recent late payment occur?
  2. How severe were any late payments (30 days, 60 days, charge-off, etc.)?
  3. How many accounts on the credit report have had late payments?

"Of these three questions, the one typically having the most impact on your credit score is the first: recency," he says.

 

"To illustrate, if a single late payment occurred a few years ago and all payments on all accounts have been made on time since, that single late payment will have little negative impact on your score. On the other hand, according to a study conducted by FICO on credit scoring impacts, a recent late payment can cause as much as a 90-110 point drop on a FICO score of 780 or higher."

 

"And while any negative score impact from a late payment lessens over time, this information will remain on your credit report for seven years and can be expected to continue to impact your score, at least to some degree, for much of that time," Paperno adds.

 

Sprauve also details some of the factors that go into determining how much a late payment will hurt your scores:

 

The impact to the FICO score resulting from a new delinquency hitting the credit file can vary significantly depending upon the individual consumer's circumstances:

  • Other history of account delinquencies (on this account or other accounts), or collection references, or adverse legal items on the credit report.
  • Balance outstanding on the delinquent account.
  • Number of other accounts on the file which are currently paid as agreed.
  • Length of credit history.

The bottom line? One slip up and your credit score may take a dive, especially if you have otherwise stellar credit.

"The old analogy of 'the bigger they are, the harder they fall' applies to credit scores, too," warns Ely. "If you have a really high FICO score, you'll take a bigger hit for a late payment than someone with a lower FICO score."

 

While the best defense is to be meticulous about paying your bills by the due date, if you do mess up, try to persuade the lender or collector to remove the blemish from your reports. While they may balk at first, you may be able to get them to change their minds if you have a good explanation as to why it happened -- and if you can convince them it won't happen again.

 

More from Credit.com and MSN Money:

22Comments
Jul 12, 2012 3:39PM
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Brace for the worst...Cut up those credit cards and tell the thieving banks and credit bureaus to go to hell
Jul 12, 2012 3:50PM
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I own my house and my car. No mortgage, no car loan. I pay cash for most items anyway.
If I couldn't get a loan when I need one, or I couldn't get one for the terms I want - then I wouldn't bother to buy.
I have had credit cards in the past & got  out from under them. I haven't held any for several years and don't plan to ever again - no loss.
I don't care much about my credit score. Thankfully, so far, it hasn't mattered. It is all a bunch of hooey anyhow.
Jul 12, 2012 4:30PM
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It hardly even matters.  I've had "bills" sneak up on me from years in the past, which I never even knew existed, or which were beyond the year limit for collection, and they still end up on my report.  Its all nonsense.  All of it.  Even just closing an account (an empty, unused one) damages your report.  I've given up caring about it, its that useless.
Jul 12, 2012 3:57PM
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Screw credit. Screw banks. Screw payments. I buy with cash or i go without. Yeah, i know it's not for everyone. What is, besides food ? But that's my choice and i love it. Never have to worry about being late with a payment or filling out a credit application that takes hours anymore ( so i've heard ).
Jul 12, 2012 5:06PM
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Like I have said a thousand times before .... the credit companies are not the government - screw them. The last of the 3 major companies didn't even show up till the 70's. Who in the hell do they think they are? And NO... I will not give out my Social Security number to them or anyone else.. They act as if they control the country  I do not have a SCORE because I do not recognize any three of them as a legitimate  business. And my SCORE to them is "0"
Jul 12, 2012 5:29PM
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"The first thing to note is that most lenders do not report missed payments until the account is 30-plus days past due,"

 

Then the author procedes to give an example of someone being reported late for being 10 days past due.  This guy is stupid.  The lowest date is 30 days.  If you are 10 days late and you are reported 30 days late, the reporter has reported incorrect information.  Dispute it and demand it is removed.  If they refuse to remove it then sue them.

 

I have sued Transunion, Experian, Equifax and Advanta Bank (now bankrupt) and won.  I hate the credit bureus and the masters they serve (the banks).

Jul 12, 2012 4:13PM
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One thing I never understood was what gives a company the right to collect private data on you and then SELL data about YOU for profit...sometimes in ways that can be negative for you...  If I start making Mickey Mouse T-shirts, Disney is going to sue me...  Seems like they're basically selling info on us in a similar way...  Then again we probably agree to it in the pages of legal mumbo jumbo we have to sign but never have time to read...
Jul 12, 2012 4:13PM
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Also watch "friends" that you co-sign loans for.  One late payment by a (now former) friend drop our score by over 40 points.  Lesson?  Do not co-sign, period.
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one of the biggest problems with our economy is that we are a debt based society. i have been debt free for 19 years and saved all of the money to build my house. forget credit scores, by being debt free for so long my credit score is in the toilet, who cares? i pay cash for everything i own. i save the money then i buy the product from cars to houses yes it can be done. you have to give up the immediate gratification of having something that you dont have the money for. get real america

dr deb

Jul 12, 2012 6:48PM
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Right-O--you be late w/payment--U be  penelized! BUT U send in payment[s]; they take up to 4 months to cash heck! Thats ok! So I do not care anymore about this credit score nonsense! Also a friend has stopped usng CCards now for past 6 years; went to get mortgage, but for past 22 years had lottsa credit--but 6 yrs, CASH! So no mort. in past 3 years he had no credit transactions so no credit history--no loan! Dammed if ya do, or don't. Ther rules always change so only rich get the $. And why do they need loans! ? Right-o again--use otherpeoples $ not MY $-so if business goes bust--I still gotts mine!

All this credit/loan idiocy must change drastically as well as stopping all foreign imports or we are SOL'd totally.

Jul 12, 2012 5:42PM
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Folks, using only cash doesn't avoid from having credit score.  Unless you live in the woods with no electricity or basic civil needs.  Credit score covers payments for electric bills, house payments, cable, car, renting, and many other things no matter if cash or a credit card is used. 

Credit scores are important as they can show how well a person pays on-time for services/goods rendered as agreed upon with any form of payment.
Jul 12, 2012 6:39PM
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good luck renting a car or reserving a flight or even making a hotel reservation without a credit card.you must live under a rock in the woods!
Jul 12, 2012 5:29PM
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"The first thing to note is that most lenders do not report missed payments until the account is 30-plus days past due,"

 

Then the author procedes to give an example of someone being reported late for being 10 days past due.  This guy is stupid.  The lowest date is 30 days.  If you are 10 days late and you are reported 30 days late, the reporter has reported incorrect information.  Dispute it and demand it is removed.  If they refuse to remove it then sue them.

 

I have sued Transunion, Experian, Equifax and Advanta Bank (now bankrupt) and won.  I hate the credit bureus and the masters they serve (the banks).

Jul 12, 2012 6:18PM
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It does not hurt if you let the creditor know that your payment is going to be late, and an approximate date of your check's arrival.  Of course, this is only good for a once-a-year type of excuse...
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