Your credit card payment history plays the most crucial role in determining your credit score. Even if you have an otherwise spotless credit history, forgetting a payment for say 30 days can knock as much as 100 points off your score. Did you know that?
In this article, we look at how and why late payments negatively affect your credit score to aid you in your path to financial freedom.
The Effects Of Not Being On Time
As mentioned above, missing a payment or being late can knock your credit score down by as much as 100 points, and while that’s not the end of the world, it can reduce your chances of getting new lines of credit.
However, beyond the ding to your credit score, remember that banks and lenders consider your payment history when factoring your credit risk.
Stated by a Dallas credit repair expert, if you have a long history of paying on time, you prove that you’re a reliable borrower and responsible with money. But habitually missing payments suggests that you can’t pay your debts and are probably irresponsible with your money.
Here are some other effects of missing payments or not paying on time.
If you miss your payment’s due date, even by a single day, you may be charged a late fee. If you continue to pay late, these fees accumulate.
Rise in Interest Rates:
If you continually pay your creditors late, they may raise your interest rates as a penalty. In some cases, as with credit cards, the interest rate can go as high as 29.99%, which means you have to pay a lot more money to pay off your balance.
Also, if you signed up with a credit card with a promotional rate of 0%, you may lose that rate.
Negative Mark on Credit Report:
Depending on how late you are with payments, the three major credit bureaus may be notified. Late payment history can stay on your credit report for up to seven years.
If You Make A Late Payment
Remember that if you do miss a payment, the best thing you can do is to pay it as soon as possible because the longer the delinquency, the more your credit suffers. Also, if you missed a payment or made one that’s a few days late, you can request that the late fee be removed if this was a one time mistake.
If your interest rates rose because of the late payment, work hard to get it back to its original amount by making the next six months of payments on time. Lastly, if your score took a hit, you can improve that by making all future payments on time.
Life happens and sometimes we get behind or have problems which cause us to miss payments or pay late. The key is to get back on track as soon as possible to keep your credit in good standing.
Remember it’s essential to keep track of your credit by monitoring your score and report every month. There are many apps and services available to help you and notify you when your score changes.