A late payment can significantly drop your credit score!
How long do late payments stay on your credit report?
As with most negative items on your report, late payments can remain on your credit report for 7 years.
However, they will usually only impact your credit score for up to 3 years.
In this article we will explain how late payments affect your score and how you can avoid getting late payments in the first place.
How Late Payments Are Affecting Your Credit Score?
First, you will need a copy of your credit report.
Get a free copy of all three of your credit reports from www.annualcreditreport.com
Your credit score is an estimate of how likely one is to go 90 days late on an account. A single 30 day or 60 day late payment will certainly hurt your score, it is still something you can recover from. Being 90 days late is detrimental to your score and will take much longer to recover from.
How Long Do Late Payments Stay on a Credit Report?
The majority of negative items will stay on your credit report for up to 7 years. This includes collection accounts and late payments. However, just because the negative information will be on your report for 7 years doesn’t mean it will be affecting your score for 7 years.
FICO’s scoring system gives more weight to recent payment history. This means that as negative items age, the impact they have on your score decreases. If you are 30 days late the biggest impact on your score will be when it is added to your report. Since the late payment is recent it will drop your score fairly significantly. However, over time the negative impact that late pay has on your score lessens.
How Much Does a Late Payment Hurt My Credit Score?
Your payment history makes up 35% of your overall credit score. Late payments hurt your payment history which is the single biggest factor in determining your credit score. If you have a late payment here and there, the negative impact on your score is minimal. However, if you are constantly late on payments and have multiple 30 day or 60 day late payments, your score will drop significantly.
It is impossible to know how many points your score will drop because of a late payment. everyone’s credit report looks completely different, therefore the impact varies. It is not uncommon for a 30 day late payment to drop ones credit score by as much as 50 points. If that lone late payment is the only negative item, your score will start to rebound in the coming months.
Items That Negative Affect Your Credit Score
- Late Payments: Late payments will have a significantly negative impact on one’s credit when it is recent. The more time that elapses and the older the late payment gets it will have less of an impact on one’s credit score.
- Hard inquiries: A hard inquiry occurs when you give a company permission to pull your credit report. Whenever you apply for a loan or credit, the lender will pull a hard copy of your credit report. Hard inquiries remain on your credit report for 2 years. However, hard inquiries will only negatively affect your score for 12 months.
- Collections: A collection account is a result of an account going more than 120 days late. The creditor will either sell the debt to a third party collection agency to collect the debt. Or they will have their internal collection department collect the debt for them. Collection accounts remain on your report for 7 years.
- Charge-offs:A charge-off is the result of a collection account being uncollectible. The original creditor can charge-off the account and not have to pay taxes on the debt.
- Repossessions or Foreclosures: If you fail to make payments on your mortgage or car loan it will result in a repossession or foreclosure. Foreclosures and repossessions will stay on your credit report for 7 years.
- Bankruptcies: Whether you file Chapter 7 or Chapter 13 bankruptcy it will remain on your credit report for a period of 7 years. Chapter 7 bankruptcy will wipe out all of the outstanding debt. A chapter 13 bankruptcy will reduce the outstanding debt and typically will require a monthly repayment program.
Can You Remove Late Payments From Your Credit Report?
You can dispute any information on your credit report, including late payments. If you believe a late payment is being reported in error, you can contact the credit bureaus directly and dispute it. The credit bureau will contact the creditor asking them to validate the late payment is accurate. If the creditor fails to respond with satisfactory information within 30 days, the credit bureau will remove the late payment from your report.
You can also try to remove a late payment from your credit report by contacting the creditor directly. In some cases creditors will remove late payments for consumers as an act of goodwill for being a long time customer.
For instance if you have a Capital One credit card and forgot to make a payment one month and now it is being reported to the credit bureaus. You can contact Capital One and speak to customer service to see if there is anyway they can remove the late payment. Sometimes this will work, other times it won’t, it is completely up to the creditor. It’s definitely worth a shot.
How Late Payments Affect Your Ability to Get a Mortgage
Having late payments can really hurt your chances of qualifying for a mortgage. While there are mortgage programs for people with bad credit. Many programs will not allow more than one late payment within the past 12 months regardless of your credit score.
FHA loans are available with a 580 credit score. However, you will not qualify with more than a single 30 day late payment within the past 12 months. If you’re planning on getting a mortgage anytime soon it’s very important you stay on top of your payments.