This is the second in a series of articles to help you better understand how you can take control of your credit.
This week’s topic is:
How do late payments affect my credit score?
There are three questions that will help you understand the possible impact:
- How long ago did the most recent late payment occur?
- How severe were any late payments (30 days, 60 days, charge off, etc.)?
- How many accounts on the credit report have had late payments?
“Of these three questions, the one typically having the most impact on your credit score is the first; how recent. To illustrate, if a single late payment occurred a few years ago and all payments on all accounts have been made on time since, that single late payment will have little negative impact on your score. On the other hand, according to a study conducted by FICO on credit scoring impacts, a recent late payment can cause as much as a 90-110 point drop on a FICO score of 780 or higher.”
“And while any negative score impact from a late payment lessens over time, this information will remain on your credit report for seven years and can be expected to continue to impact your score, at least to some degree, for much of that time,”
The impact to the FICO score resulting from a new delinquency hitting the credit file can vary significantly depending upon the individual consumer’s circumstances.
- Other history of account delinquencies (on this account or other accounts), or collection references, or adverse legal items on the credit report
- Balance outstanding on the delinquent account
- Number of other accounts on the file which are currently paid as agreed
- Length of credit history
The bottom line? One slip up and your credit score may take a dive, especially if you have otherwise stellar credit.
‘The old analogy of ‘the bigger they are, the harder they fall’ applies to credit scores, too. “If you have a really high FICO Score, you’ll take a bigger hit for a late payment than someone with a lower FICO Score.”
While the best defense is to be meticulous about paying your bills by the due date, if you do mess up, see if you can’t persuade the lender or collector to remove the blemish from your reports. While they may balk at first, you may be able to get them to change their mind if you have a good explanation as to why it happened — and if you can convince them it won’t happen again.
Professional Consultants at Coast to Coast Credit Services, Inc. can answer all your questions and offer you a “Free” evaluation of your current credit situation. Call today at: 888-292-2525’
Article courtesy of: Credit .com, written by: Gerri Detweiler