Missing Payments & Your Credit Score

Missing Payments & Your Credit Score

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated August 26, 2022

Missed a credit card payment? If so, you could be looking at some repercussions if you don’t make good on your payments right away.

Most importantly, your credit score could take a hit if you are late on your bill payments. And if you make missing payments a ritual, your credit score can really be damaged, requiring more effort to bring it back up to par.

With a damaged credit score, you could find it difficult to get approved for loans and credit products. But not only that, you might find it tough to get an apartment, land a job, or even secure a cell phone contract.

So, what effects do missed payments have on your credit score and pocketbook? Let’s take a closer look.

How to rebuild your credit after a late payment.

Effects Of Late Or Missed Payments

If you are late on a payment or miss paying it altogether, you can expect a negative impact on various fronts, including the following:

Late penalty fee charged. If your bill is paid late, you may be charged a late fee. Even if your bill is paid a day or two after it was due, you may incur late charges, which you will see on your next statement. And if you make it a habit of missing payments, expect continued late fees.

Increase in interest rate. If you are regularly late on your bill payments, your creditor may penalize you with a higher interest rate than what you are paying right now. For credit cards, a penalty APR can be as high as 29.99%. And if you were taking advantage of a 0% APR as a promotional incentive when you first signed up with your credit card provider, you may lose that and wind up with a significantly higher interest rate.

Notes on your credit report. Payments that are made a few days late are not usually reported to the credit bureaus. But if you are at least 30 days late on making a payment, the creditor will likely report this information to the credit bureaus, and your credit report will be updated with a note about your late payments. This note can remain on your credit report for as long as seven years.

Lower credit score. Your credit score can be negatively affected by a string of missed or late payments. Your payment history is the most important factor that influences your credit score, so missing payments will certainly have a big impact on it. 

How Missed Payments Affect Your Credit Score

The effect that a missed payment has on your credit score depends on how late the payment is and what your credit score currently is. The later the payment, the worse effect it will have on your credit score. Further, a higher credit score will take a bigger hit than a lower credit score because the latter has already been impacted by past negative financial activity. 

So, if your credit score is currently high, you’ll notice a bigger impact than if your score was already brought down in the past due to irresponsible payment activity. And if your payments are over 90 days late, for instance, your score would be pulled down further than if the payments were 30 days late. 

Your credit score is calculated based on a number of factors, but your payment history carries the most weight. More specifically, 35% of your credit score is based on your past payment behaviour, so it’s easy to see how late payments can have such a big impact on your credit score.

Credit score

Will My Credit Score Be Affected By A Credit Card Payment That’s One Day Late?

Late payments less than 30 days may incur late penalty fees, but your credit score shouldn’t suffer. As mentioned earlier, credit bureaus are informed of late payments that are 30 days late or more. So, if you are only a day or two late on making your credit card bill payment, your credit score will not be affected. 

Also mentioned earlier, the longer the payment is overdue, the worse the impact on your credit score. That means a 60-day late payment is worse than a 30-day late payment. And of course, payments that are 90 days late or more are even worse.

What Can I Do if I Missed A Payment?

If you’ve missed a bill payment, time is of the essence to take action to minimize the effect on your credit score and reduce any late fee penalties you may be charged:

Pay the bill immediately. The first thing you should do when you miss a bill payment is to pay it right away. Even if you are only able to make the minimum payment (in the case of a credit card bill), it will still count as a payment made. This is important when trying to protect your credit score from being damaged.

Write a goodwill letter. You can opt to write a goodwill letter in which you ask the creditor to get rid of the negative mark on your credit report

Reset your interest rate. If you experienced an increase in your interest rate as a result of late payment, your credit card issuer can reset your rate back to what it was before your penalty if you can make timely payments for six straight months. That’s why getting back on track is so important. 

Request removal of a late payment fee. You may be able to ask to be relieved of the late fee if you were charged for missing a payment. This is an option if you’re in good standing with your financial institution.

How Does Bad Credit Affect Daily Life?

What Can I Do To Avoid Missing Payments?

Sometimes, consumers miss bill payments because they are simply unable to pay up when the bills come due. Whether it’s because of overspending, loss of a job or income, or any other situation that has impacted a person’s finances, this can result in a situation in which consumers are financially incapable of making timely payments in full.

But many other times, it’s just a matter of discipline or organization to remember to pay the bills when they come due. In this case, you may find it helpful to set up automatic payments and reminders.

Automatic payments to pay your bills by their due date can help you ensure that you’re never late paying your bills because of a lapse in memory. You can set up your accounts so that when the due date arrives, the funds from your bank account are withdrawn to fulfill payment obligations.

If you’re worried about overdraft fees, you also have an option to automatically pay the minimum amount required instead. Then, you can pay the remainder online at a later date to catch up. This way, you’ll never be late for a payment. 

Alternatively, you can set up text or email alerts that will notify you when your bills are coming due. Ideally, they should be set to go off a few days before the due date to give you enough time to make your payments. 

Final Thoughts

Late payments that are at least a month overdue can put you in a predicament. Not only could you be slapped with a penalty fee, but your credit score can also be negatively impacted. While there are things you can do to help mitigate the situation after the fact, your best bet is to develop responsible payment habits to keep your credit score safe.

Rating of 5/5 based on 5 votes.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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