The Link Between Late Payments and Bad CreditOcak 15, 2019
Late Payments are a bad influence
Making all of your Late payments on time is crucial to the health of your credit rating. Payment history accounts for about 35% of your overall credit score. Banks, credit card companies, and other lenders look at your payment record in 30-day increments. If a payment is not made within about 30 days from the due date, many of these companies will report this as a delinquency to the credit bureaus (Equifax, Trans Union, and Experian). Not making the payment within 60 or 90 days or more usually results in more severe delinquency notices.
No one can predict how adversely late payments affect your credit score as there are thousands of different models for calculating this number. However, they are all designed to predict whether or not you will be more than 90 days late on a payment within 24 months.
Payment delinquency notices reported to the credit bureaus are not the same as the late payment notices the lender sends you. The information sent to the credit reporting agencies includes the amount of the payment due and how long it has been past due. Many times, these notices can be sent to the agencies without your ever knowing your payment was late. For this reason, late payment delinquencies affect your credit more severely with higher amounts due and the later they are.
Will accumulating accumulated delay notifications seriously damage your credit?
Accumulating late payment notices can hurt your credit considerably. A few 30-day late payments on your report over time may not have as detrimental affect on your FICO score as several 30-day delinquencies or a few 60- or 90-day notices. Additionally, late payment notices can stay on your credit report for years – even after you make the payment. Some credit experts report that a single 90-day delinquency can be as damaging to your credit as a bankruptcy.
Although the time frame varies from company to company, late payments are usually sent to collections at some point. Typically, the lender notifies you of pending collection activity before your account is sent to either an in-house collection department or a collection agency for payment, giving you a chance to make a payment before an even more severe negative item is sent to the credit bureaus.
Unpaid collections can lead to even worse situations for your credit score: repossessions, foreclosures, or settlements.
- Repossessions & Foreclosures: Despite the fact that the repossessed car or foreclosed home is returned to the appropriate lender, these serious delinquencies can stay on your credit report for up to seven years. The lender will argue that you signed a contract, promising to pay each month on time and you didn’t. These items have severe consequences to your credit score.
- Settlements: Occasionally, you may reach an agreement with a lender for accounts in collections to pay less than the amount due. Despite the fact that you made the agreed upon payment, you still did not live up to your original contractual arrangement with the lender and it is your credit score that suffers.
The good news is that there is help. Removing late payment notices, especially those beyond 90 days overdue, is usually very difficult. While you as the consumer have the right to dispute these notices, this venture is not always fruitful. Under the Fair Credit Reporting Act, the credit bureaus must investigate your claim within 30 days of filing. While preparing this claim, many have found more success with the help of credit professionals.