What Happens to Your Credit Score When You Pay a Bill Late?

Your credit score is an indicator of how risky you are as a borrower. If you have a strong credit score, the credit card company is more likely to approve your application for a new card. And personal loan or auto lenders may be more likely to approve your loan application and give you a more favorable rate.

On the other hand, a lower credit score tells lenders and credit card issuers that you don’t necessarily have the most solid track record of paying your bills and managing your credit well. Thus, you may be denied a loan or credit card if your credit score is poor.

Now, there are various factors that are used to calculate a credit score. This includes the amount of revolving credit you use at once, the length of your credit history, the type of credit account you have, and the number of new loans or credit cards you recently applied for.

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But a more influential factor than any other when calculating a credit score is your payment history, which shows how timely you are with your bills. And that’s why paying bills late can cause major damage to your credit score — even if it only happened once.

Pay to be on time with bills

If you’re a few days late paying a credit card bill or submitting a mortgage payment, it usually won’t affect your credit score (although you may face late fees or fees from the entity you owe the debt to). In fact, Experian says late payments aren’t even reported to the credit bureaus until you’re past 30 days past due.

But from there, one late payment can potentially drag your credit score down. And unfortunately, the damage may be more severe if you have strong credit from the start.

You might think that if your credit score is high, one late payment won’t do much harm because it’s such an unusual event for you. But actually, the opposite is true. Experian says that if you already have bad credit and another late payment is thrown into the mix, it likely won’t have as bad an impact as a late payment for someone with very good credit. Go figure.

Meanwhile, the farther behind you are on payments, the more credit score damage you may face. Being 90 days late on a payment, for example, tends to lower your credit score more than a payment that’s only 30 days late.

You should also know that over time, the impact of a late payment on your credit score decreases. And after seven years, late payments will be completely erased from your credit report. Once that happens, they won’t affect your credit score at all.

But still, it’s important to avoid late payments as best you can. Even one late payment can cause a lot of damage.

What to do if you are late with your payment

If you’re a few days behind on your bill and you make your payment within 30 days of the due date, generally, nothing happens from a credit score perspective. However, let’s say you realize after 35 days that you didn’t make a payment. If so, contact the entity you owe money to, arrange to make a lump sum payment, and ask if it’s possible not to report your delay to the credit bureaus.

If you’ve been an account holder for years and this is your first breach, you may be off the hook – especially if you cross the 30 day limit. If not, do your best to make payments as soon as possible. You’re better off just 45 days late with a payment than 65 days late.

At the same time, set calendar reminders for when your bills are due so you don’t run the risk of forgetting to be late. Better yet, set your bill to auto-pay when the option is available. Many payees will allow you to set up automatic recurring payments, and this is a good option for fixed bills (such as if you have the same mortgage payment every month).

Finally, aim to follow a budget and track your expenses. That way, you won’t be too risky to pay late due to lack of funds.

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