Life doesn’t always go according to plan. There can be times when you may not be able to pay all your bills by the due date and you miss a payment.
If you’ve gotten yourself into a situation where you have credit card debt or some other debts, it’s important to set a goal to pay off your debt as quickly as you can. Make your payments every month, at least paying the minimum amount, if not more when you can.
Well, that’s all well and good, but things get tough sometimes. Emergencies happen. A unexpected medical expense or a car repair can throw off your monthly budget. Maybe you can’t quite scrape together the money you need to make your payment, and you’re going to miss one. Or maybe you already have, and you’re trying to find the money to pay it, albeit late.
So what does a missed payment mean for your credit score? If you miss a payment, is it already too late? Is your credit score dwindling slowly?
Not necessarily. There’s a big difference between your first missed payment, a long-term missed payment, and recurring missed payments. Miss a payment once, no need to worry about your credit score. Go more than 30-days late on a payment and some worry is warranted. That means if you make a payment as much as 29-days late, it most likely won’t harm your credit score.
Miss A Payment
If you’re about to miss a payment and you don’t have a history of late payments, call your creditor and ask them to waive the late fee. They may be flexible.
If you’ve already missed your first payment, don’t fret: as long as you bring your account current before you are 30-days late, your creditor will likely not report you as delinquent to the credit bureaus. Remember: paying a part of your payment doesn’t help your credit. It counts the same as a missed payment.
Late Fees & Interest When You Miss a Payment
Late payments come with late fees. The late fees are added to the balance that you owe, and they begin gathering interest just like the rest of your debt. Worse than that, even, your creditor can hike your interest rate if you are even a day late, raising it the penalty level laid out in your agreement. Penalty rates can run as high as 39%!
Continued Missed Payments
Your score takes a hit when you go 30-days late. It is not possible to say exactly how many points your score will drop, as that depends on the other accounts you have, too, as well as where you score was to begin with. The higher your score, the more of a hit you take for a derogatory action, in general. See the Bills.com article Missed Payments, Foreclosure, Debt Settlement & Your Credit Score to see how much a missed payment can harm your credit score.
Your score takes an even bigger hit if you go 60-days late, and an even bigger hit if you go 90-days late, and so on. Don’t throw in the towel when you start to fall behind. It can be tempting to pretend the problem will go away if you turn the other way, but you know it won’t.
Going delinquent doesn’t only affect your relationship with the creditor that you did not pay on time. The harm a late payment does to your score can make it so you either won’t qualify for other lines of credit or will pay a much higher interest rate.
Don’t Quit; Take the Right Actions
Once you start to fall behind, take these four steps:
- Keep in touch with your creditors. You may not get flexibility from your creditors, but you surely won’t if you don’t try.
- Make a budget to see if there is any way to squeeze out enough money to catch up.
- Look into all of your debt relief options. You may benefit from a credit counseling service or a debt settlement program.
- Go over your credit report regularly. Make sure all the derogatory info on it is accurate.