What Effects Do Late Payments Have on Your Credit Score?

 

Unless you're independently wealthy, you'll probably have to buy stuff on credit from time to time. And if you don't have a decent credit score, acquiring financing for things like purchasing a house or a car, or getting a credit card, will be much more difficult.

As a result, having a decent credit score is crucial if you want to enjoy many of the benefits that life has to offer. A credit score of 700 or more is considered good, and it means you're more likely to get approved for low-interest loans and credit cards than if you had bad credit.

Your credit score is determined by a number of factors, including:

  • History of Payments
  • You owe a certain amount of money.
  • Different Types of Credit (i.e. loans, credit cards, retail accounts, etc.)
  • Credit History Length

However, out of all of these indicators, payment history has the most impact on your credit score.

We'll look at how late payments effect your credit score and how to increase your credit score in this article.

CREDIT AND LATE PAYMENTS

Late payments are the most significant factor affecting your credit score, according to Equifax. "If you miss a payment on one of your credit accounts, be it a credit card, mortgage, or other loans, you could see your credit score plummet," says Equifax.

Keep in mind that each credit reporting agency scores in a different way, although they all perceive late payments negatively.

While missing a payment will lower your credit score, it's not all doom and gloom. Credit reporting bureaus consider a variety of variables when it comes to late payments, including how late they are and whether you have a history of late payments. If you're 90 days late on a payment, for example, your credit score will suffer more damage than if you're only 30 days late.

Keep in mind that the longer you go without paying your bills, the lower your credit score will get, so if you miss a payment, make it as quickly as possible. If you miss a payment by one or two days, it won't sting nearly as much.

LATE PAYMENTS CAUSE HOW MUCH OF A DROP?

It depends on how late the payment is, but according to Credit.com, "a recent late payment can cause as much as a 90-100 point drop on a FICO Score of 780 or higher." That much of a drop is enough to knock you out of the "good credit" range and into the "fair credit" range, making it more difficult to get credit in the future until you raise your score.

It's also worth remembering that the better your credit, the more likely you are to suffer the consequences of a late payment on your credit score.

HOW TO FIX CREDIT SCORE FOR LATE PAYMENTS

The first step is to maintain track of your credit history. If you have access to a smartphone, it's simple to do. There are numerous apps available that will help you monitor your credit score and notify you when a lender conducts a credit inquiry or if your score rises or falls. You should always be aware of your current position so that you can determine where you need to go.

You can start taking efforts to enhance your credit score once you know what it is. The most important thing is to become fixated on making timely payments. Signing up for autopay with your accounts is one of the finest methods to do this. When you set up autopay, you authorize your lender to deduct cash from your checking or savings account on the due date. This is by far the most effective method for ensuring on-time payments.

You can set up reminders for each payment to remind you that it's due and that it's time to pay if you're concerned about security or don't feel comfortable giving creditors access to your accounts. If you have a smartphone, there are a range of reminder apps that can help you keep track of your bills and pay them on time.

Making your payments on a weekly basis is also a good idea. Making smaller, weekly payments will keep you up to date and not drain your account as quickly for some people who find the monthly payment too much.

It's fairly uncommon for people to miss a payment now and then, and while this will hurt your credit score, you can improve your credit by making and keeping your payments on schedule.


Related Articles:

https://thephenixgroup.com/does-debt-consolidation-hurt-your-credit-score-2

https://thephenixgroup.com/what-is-a-hard-inquiry

https://thephenixgroup.com/remove-foreclosure-credit-report



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