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Late Payments Impact on Credit
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Courtney (She/Her)
Certified Credit Union Financial Counselor
Posted April 7, 2022
Between life events, pandemics, and unexpected emergencies, it’s not uncommon to be late on making a payment to a loan or credit card at some point during your lifetime. The impact of a late payment on your credit score will vary depending on a variety of factors including how late the payment is, your current score, and more. Keep reading to learn more about these factors and ways to help keep you on track.
Tiers of late payments
Being a day late on a payment to a loan or credit card doesn’t mean the credit bureaus will know immediately. Actually, payments aren’t reported as past due to credit bureaus until they are 30 days late or more. The higher your credit score, the more a late payment can cause it to decline from missing one payment. Past due payments typically use the range below with the longer the payment is late, the higher the impact on your credit score.

     - 30 days past due
     - 60 days past due
     - 90 days past due
     - 120 days past due
     - 180 days past due
Now what?
Typically, once an item has gone long enough without a payment being made, the loan can be charged off or sold to a collection agency. Having a loan charged off doesn’t mean you no longer owe on the debt, but the lender no longer believes they will receive funds for the amount owed. This debt will still show on your credit report and will significantly bring down your credit standing. Items can also be sold to collection agencies where they will take over attempting to collect the past due amounts owed. You can expect to receive letters or phone calls by the collection agency once they take over your debt.
Ways to avoid late payments
     - Set up automatic payments
     - Create reminders or alerts for upcoming payments if automatic payments don’t work for you
     - Ask your lender or financial institution if you’re able to select the due date for your loan to correlate with when you get paid
     - Contact your financial institution or lender if you know you’ll be late, before the due date, to see what options they have such as one-month skipped payment, interest only payment, etc.
     - Set aside money every time you receive money so the full payment doesn’t come out of one paycheck
What to do if you’re currently past due
     - Know if and when a late fee will be assessed and how much it will cost
     - Ask your lender of financial institution to waive any possible fees or interest rate increases
     - Make it a goal to pay before the 30 day mark to avoid being reported to credit bureaus
     - Review your budget to see what could be changed to allow the payment to be made on time next month
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