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How Late Payments Impact Your Credit Score

Michelle Summerfield

Jan 15, 2020 5 min read

Update: Borrowell now provides free weekly credit score updates. Sign up today to regularly monitor your credit score for any noticeable changes.

Missing payments is unfortunately a bigger deal than you might think. Making a late payment on credit cards, personal loans or your mortgage can harm your credit score.

If you’ve missed a payment and are wondering how it’s affecting your credit rating, we’re answering the most essential questions about missed payments. 

How Does Payment History Impact Credit Scores

How much does it count for? 

Payment history is one of the most important factors influencing your credit score. It makes up 35% of your Equifax score. 

Lenders use your payment history to determine your risk as a borrower. Having a history that shows on-time payments demonstrates to lenders that you’re likely to pay your bills on time, while a history of late payments raises red flags to creditors.

If you have a payment that is more than 30 days late, creditors may report it to the credit reporting agencies. In Canada, there are two credit bureaus - Equifax and Transunion. Once the late payment is reported, it may show up on your report and could hurt your credit score. Late payments are listed on your credit report based on how many days late they are:

  • 30 days
  • 60 days
  • 90 days
  • 120 days
  • 150 days
  • Or charged off

How much does my credit score drop if I miss a payment?

How much a late payment affects your credit score depends on several factors, such as how severe it is, how recent it is and how frequently you’ve paid late.

It’s hard to pinpoint exactly how many points your score will drop for a missed payment. Each credit reporting agency has its own model for evaluating your credit information and assigning you a score. This means your scores will vary between the agencies.

The longer a bill goes unpaid, the more potential damage it has on your credit score.

As an example, if you have a good credit score of 780 and you make your first-ever late payment (30 days late), your score can drop 90-110 points. But if your credit score is 680 and you’ve made two late payments (90-day delinquency on a credit card account from two years ago and 30-day delinquency on an auto loan from a year ago), your score may drop 60-80 points with another 30-day late payment. 

If you miss even just one monthly payment on one of your accounts, the late payment could remain on your credit history for up to seven years. If paying late becomes a habit, your account could be charged-off or sent to collections, which could further harm your credit score and make it difficult to access different types of credit

When does a late payment show up on credit reports?

In general, late payments won’t show up on credit profiles for at least 30 days after the date you miss the payment

But bear in mind that you may still incur late fees or an increase in interest rate depending on the lender.

If you’re only a few days or weeks late on your payment, and you make a full payment before the 30 days is up, lenders and creditors may not report it. Partial payments don’t count, so unless you pay in full, you’ll still be marked as late.

What is a charge-off?

A charge-off means a lender or creditor has written off your account as a loss, and the account is closed, meaning you’ll no longer be able to use it.

Once a charge-off occurs, your debt may be transferred to an internal or third-party collection agency, and you’re still legally obligated to pay your debt back.

Charge-offs usually happen when you’re more than 120 to 180 days late, or you miss a payment on the account. Once the lender reports it to the credit reporting agencies, it will show up as a charge-off status along with the late or missed payments. Similar to late payments, a charged-off account will stay on your credit report for up to 6-years from the date you first missed or made a late payment.

Can late payments be removed from your credit report?

Missed payments affect your credit rating immediately. So one missed payment can lower your score as soon as it's reported and impact the types of credit you can apply for in the future. It’s challenging to have them removed unless they are an error by your lender, creditor, or the credit reporting agency. 

If there is an inaccurate late payment, charge off or other judgements, get your report, identify the error, and request the credit reporting agency remove it immediately. This could happen if you have taken a payment deferral and it has been improperly reported to Equifax.

If the information on your report is accurate, it’s going to be a challenge to get a late payment removed. Depending on the creditor, it may be possible to negotiate and remove negative late payment information in exchange for payment in full or partial payment of your debt. It may require writing a goodwill letter explaining your situation or negotiating a payment plan.

If you miss a payment what can you do?

Everyone slips up from time to time. If it’s had a negative impact on your credit score, there may be things you can do to improve for the future - including using new bill tracking tools like Borrowell Boost! 

Get more practical ways you can address late payments on your report and build positive financial habits here

The Bottom Line

If you’re struggling to keep up with payments, don’t be afraid to reach out to creditors. There are also great tips and tools to help you improve your credit payment history.

At the first sign of trouble or an emergency that’s entered your life, contact creditors to find out if they offer deferments, or payment deferral plans so you can avoid negative hits to your credit report. 

Download the Borrowell app and keep track of your credit score on a weekly basis. It takes less than 3 minutes, it's free, and it won't affect your credit score.

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Borrowell® is a registered trademark of Borrowell Inc. All Rights Reserved. The Equifax credit score is based on Equifax’s proprietary model and may not be the same score used by third parties to determine your credit profile. The score provided to you for educational use is the Equifax Risk Score.

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