How Does My Late Credit Card Payment Affect My Credit Score? | Build

How Does A Late Credit Card Payment Affect Your Credit?

August 1, 2022

It’s crucial to pay off your credit card and loans on time to maintain a good FICO score. This is because your payment history plays a huge role in determining your overall credit score.

However, we all occasionally tend to make late credit card payments. Fortunately, not all of them are treated equally. In fact, some late credit card payments may not show up on your credit report as long as you don’t wait too long after they’re past due.

If you’re trying to build your credit, or are looking to maintain a good credit score, understanding how late payments affect your score is crucial. This article covers everything you should know about penalties for late payments so you can keep yourself in good standing credit-wise.


Credit Scores and Late Credit Card Payments

Your credit score is divided into five categories:

  •     Payment history
  •     Amounts owed
  •     Credit history length
  •     New credit
  •     Credit mix

Your payment history is the most important factor, accounting for around 35% of your credit score.

While consistent on-time payments may not lead to that perfect 850 FICO score, they can help you keep it in the higher range.

Your payment history is a record of all your payments. The scoring model focuses on late payments and reports:

  •     How late the credit card payments were made
  •     How long ago your late payments were
  •     How many times late credit card payments appeared on your report

If your report is in good shape overall, a single 30-day late credit card payment, or a missed credit card payment by one day, may not completely ruin the credit score you’ve built. However, it might cause some damage to it. 

Payments that are less than 30 days late often don’t get added to your credit score at all. 

If you forget to make a payment, or your payment bounces due to a lack of funds in your account, you may have to pay a penalty or a late/returned payment fee. However, it won’t affect your credit score or get reported if you take action quickly.

Conversely, the later you are with a payment, the more it will affect your credit score. For example, if your payment is 60 or 90 days late, your credit score will drop lower than if you had remitted payment before the 30-day mark.

You also risk accumulating further penalties and having more points knocked off your credit score. This often depends on what bucket you fall into, namely:

  •     30 days past due
  •     60 days past due
  •     90 days past due
  •     120 days past due
  •     150 days past due

This happens because the longer a bill is left unpaid, it’s considered less likely that you’ll make full repayment. Future lenders see this as a credit risk.

However, there is no exact metric for point deduction since your credit score depends on several factors. This includes the duration of your credit use, and how well you’re doing in other areas. 

How To Address a Late Credit Card Payment on Your Credit Report

Mistakes happen and there may be unavoidable circumstances that cause you to make a late credit card payment. While you shouldn’t let that stress you out too much, it’s important to do damage control.

Your first step should be to pay the bill as soon as possible. If it’s within the 30-day period, great. If 30 days have passed, you should still pay the bill as soon as you can. In case you’re unable to do so, the lender may send your account to a collection agency. This can damage your credit score more than if you simply made a late credit card payment.

Though the late payment won’t be removed from your report, you can still recover and improve your credit score. To do so, you stay on top of your monthly payments. You should also address issues such as high credit card balances and numerous credit inquiries.

Good credit management and prompt payments can help you recover your credit score in time, thereby helping you get more credit options in the future.


How Long Do Late Payments Stay on a Credit Report?

Fortunately, not all late credit card payments are treated equally. Any red marks on your report won’t last forever.

When we talk about late payments, we’re talking about payments made after the deadline even, if you missed your credit card payment by one day. Having said that, a lot of creditors have a grace period during which you can make your payment without penalties for late payment

After the grace period is over, the provider will charge a late fee, and it will be reflected in your credit report.

When do late payments fall off your credit report? Typically, late credit card payments show up in credit reports for seven years, unless they’re there by mistake. In case of an error, you can submit a dispute to have it taken off your report. Otherwise, you’ll have to wait seven years before it’s automatically removed and for it to no longer affect your credit score.

The longer it’s been since your last late payment, the less it will affect your credit score. However, creditors will still be able to see that you made a late payment at some point. 

Though it’s difficult to gauge how long it takes to recover from a late credit card payment, a FICO study illustrated that it can take nine months to three years to recover from a 30-day late payment. On the other hand, a 90-day late payment can take between nine months and seven years to recover from. Of course, this will also depend on how high your initial score was.

Conclusion: Review Credit Reports and Pay Off Past Dues Promptly

Having a good credit score is important. To improve your credit score and maintain it, make sure to:

  •     Review credit reports on time to ensure that you don’t have past dues or outstanding balances
  •     Pay off past dues to make your accounts current
  •     Pay credit card balances to ensure that your credit utilization rate is less than 10%

Staying consistent with your payments and maintaining a good credit score is the best way to safeguard your future and ensure that you don’t face any issues when trying to get a loan.


What to do next?

The good news is, you CAN take control of your credit. We believe that everyone should have the opportunity to build their financial health. 


Sign up for a Build account today. With a Build credit builder loan, you can build credit and increase your savings.


How does a credit builder loan work? 

You make a small contribution to a bank account each month. 

Build then reports those deposits to the credit bureaus as credit-worthy payments, which builds your credit history and profile. 

Positive Payment History – making consistent payments over time –  is the largest driver of your credit score. 

Learn more about how it works or sign up today.