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Monday, January 7, 2013

I Made a Late Payment. Will it Affect My Credit Score?

Let’s say you made one of those big no-no credit mistakes. You went out of town on vacation for a week, came back home and realized you totally forgot to pay your credit card bill. It happens all of the time. Chances are you are okay. The worst thing that may happen is you have to pay a late fee, but more than likely the creditor won’t report your one-time late payment to the credit agencies. Most lenders and creditors will not report bad repayment history until you are 90 days late, and if they do not report it, it does not end up on your credit report. Since your credit score is calculated by the information on your credit report, you’re in the clear. But what if they do and that late payment ends up on your credit report. Sadly, if you have an otherwise good credit score, this will affect you the most. It could knock 100 points off your credit score – ouch! Late payments by people who already have a crummy credit score won’t get dinged nearly as bad. This may actually not be entirely true though. The way FICO is calculating credit scores going forward now gives some forgiveness to people who made that one-time mistake, but will further penalize people who have a history of not paying their bills. The best solution to make sure this does not happen is to set up automated bill paying. That way, no matter what, your bills get paid. If, however, you have a history of making late payments, you’re in a bit more trouble. You’ll wan to get a copy of your credit report and take some of the steps to increase your credit score, which you can do completely on your own.

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