How to Rebuild Your Credit After a Late Payment

How to Rebuild Your Credit After a Late Payment

Written by Shari Talbot
Fact-checked by Caitlin Wood
Last Updated October 7, 2020

Uh-oh. You’ve missed a payment. Maybe the cable bill slid down behind the desk or the postal strike meant you didn’t receive your cell phone statement. Maybe an emergency expense popped up and you didn’t have the cash to pay your utilities last month. Whatever the reason, you didn’t make a payment on time. Do you know how this will affect your credit rating?

Can’t make your loan payments on time? Read this.

To answer that question, let’s look at how our creditworthiness is measured in Canada.

What is a Credit Report?

Your credit report contains personal information such as your social insurance number, date of birth, current and previous address, and employment history. It will also include detailed information about your credit accounts, credit history, and payment information.

When you apply for a mortgage or another type of credit, lenders will use this information to approve or deny your application. Landlords may also want to see your credit report when deciding whether or not you will be able to pay your rent and employers may take a look before they choose to hire you (depending on the industry you work in).

When someone checks your credit report, it’s known as a credit inquiry.  

What is a Credit Score?

The credit reporting agencies use your financial information to calculate a credit score between 300-900, giving you a rating from poor to excellent. Credit providers use this information, along with their own slightly different calculations to determine whether you are a good risk or not. Generally, a score higher than 650 will get you approved. If your score is lower, you might be seen as high risk. Exact numbers will vary, and lenders may look at factors other than your credit score.

It’s important to note that your payment history carries a lot of weight — up to 35% of your credit score.

Credit Score Ranges CanadaTo learn more about your credit score range.

Where Can I See My Credit Report?

Canada has two official credit reporting agencies, Equifax and TransUnion. You can request your credit report, annually, with each of these agencies, at no cost, if you do it through snail mail. This is a great way to check for accuracy and make necessary corrections. In fact, we recommend that you request a report from both reporting agencies because they each contain slightly different information.

Want to dispute an error on your credit report? Click here.

Unfortunately, the free reports do not include your credit score, but both agencies will provide instant, online access to your combined credit report and credit score, for a fee.

Recently, it has become even easier to gain access to your credit score and for free. There are countless companies that have teamed up with the credit bureaus as part of their overall marketing strategies. They are attracting new clients by providing credit reports and/or scores for free, whether you choose to use their services or not. The newbies are drumming up business, consumers are getting an important service for free and the credit reporting agencies are receiving fees from each request. Win-win all around.

When you request your credit report or score yourself, there is no impact on your credit score.

Click here to find out how you can get a free copy of your credit report.

How Can a Late Payment Affect My Credit Score?

Late payments definitely affect your credit report and have a negative impact on your score. You’ll want to avoid them if you can.

You might be relieved to hear not every late payment will be recorded in your file. Each credit account on your file is assigned a number from 0-9. 0 indicates a brand-new account, 1 means you pay your bill within 30 days or the agreed term, and 9 means your account has gone on to collections or bankruptcy. You definitely want to see your accounts sitting at 1.

What’s the difference between a credit score and a credit rating? Find out here.

The good news is, you’ll only see a late payment on an account if it is more than 30 days overdue. If you catch it in time, you will be able to keep your great credit rating.

If a late payment does make it to your credit report, it’s impact will depend on several factors:

  • How late? The longer it stays unpaid, the more negatively, it will affect your score.
  • How frequent? Creditors will take note of whether this is a one-time occurrence or a habit that increases your level of risk.
  • How recent? Recent missed payments might be a red flag to a lender, suggesting you are having financial difficulty and may not be able to honour your debt.

Look here for more information about how missed payments affect your credit score.

How Can I Repair My Credit Score?

No matter what mistakes you have made in the past, from a single missed payment to a full-on bankruptcy, you can always improve your credit score. It may take time, but your patience and diligence will pay off. Here are some things you can do to get your credit score back up where you need it to be:

  • Pay any missed bills, as soon as possible, before they hurt your score any more.
  • If you are missing payments because you can’t afford them, set up a budget and seek help if you need it, to get your finances back on track.
  • If disorganization is the issue, you can use calendars, phone reminders, account alerts, and automatic payments to help you get those payments in on time.
  • If you have credit, use it, but be sure to settle up before the payment due date. If you can’t pay off the entire balance, at least pay the minimum and always pay on time.
  • If you’re trying to rebuild your credit, apply for a secured credit card, where you pay a deposit before you can use it. The funds you provide may or may not be as high as your credit limit. Start with a small limit and use it responsibly.
  • It can be tempting, but you need to avoid maxing out your credit cards. Try to stay below 30% of your credit limit to avoid harming your credit score.

If you happen to move, make sure you update all your accounts with your new mailing address. That way, you avoid missing payments due to lost mail. You can also set up online accounts and notifications to ensure you see your bill or statement and pay it on time.

Have you recently filed for bankruptcy? Here’s how to rebuild your credit.

Keep Track of Your Credit File

Whether your score is poor or excellent, it is important to keep on top of your credit. For a fee, you can monitor your activity through Equifax or TransUnion. Some banks and credit card companies also provide monitoring services, sending you alerts when credit history inquiries are made or when potentially fraudulent activities occur.

For more information about credit monitoring services, click here.

Watch for errors such as changes to your personal information or new accounts you don’t recognize and correct them immediately. Ensuring the accuracy of your credit information, regularly, can help keep your credit use in check and prevent difficulties and identity theft in the future.

Rating of 4/5 based on 7 votes.

Shari is a Freelance Writer, specializing in personal finance, business blog content and education. She enjoys taking complex information and putting it into a form the average consumer can understand. When she is not working, she homeschools her children, supports her husband in business, and enjoys traveling with her family.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Save With Loans Canada

Special Offers

Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 1%² cashback guaranteed.

View Offer
Build Credit With Refresh Financial

Build Credit With Refresh Financial

Build credit while spending money with the Refresh Financial VISA card.

View Offer
Build Credit For $7/Month

Build Credit For $7/Month

With KOHO’s prepaid VISA card you can build a better credit score for just $7/month.

View Offer
Industry Spotlight

What's happening with Canada's credit industry?

Lexop ⎯ Improving The Collection Process By Putting The Consumer First

Lexop ⎯ Improving The Collection Process By Putting The Consumer First

In an industry that doesn’t often put the consumer first, Lexop is changing the way companies manage their collection process. 

Read Post
Find The Best Rate
In Your Region
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.