Making a late credit card payment happens to the best of us. Unfortunately, your late payment can come with heavy consequences. According to the official FICO website, payment history accounts for 35 percent of your credit score. But before you become too alarmed, keep in mind that there are a number of factors behind your late payment that determine how heavily your score will be affected.
When Is a Credit Card Payment Reported Late?
Just because you have been hit with a late fee does not mean that your credit card company has reported you as late. If you are less than 30 days behind, it most likely has not been recorded. Companies report late payments anywhere from 30 to 150 days after the due date. You may want to ask your lender about their reporting methods before assuming the worst. Sometimes you can also make arrangements in advance with the credit company if you are already aware you won’t be able to make your monthly payment.
How Much Will One Late Payment Hurt My Credit Score?
There is no flat answer for this question, as there are a variety of factors determining the severity of the impact on your score. The goal of your credit score is to determine how likely you are to make a loan payment 90 days late, within a 24 month period. So, being late for more than 90 days is far worse than being late for 30 days. Charge-offs are even worse. Equally as important is timing–the more recent the late payment is, the more substantial of an impact it stands to have on your FICO score. However, a late payment a few years ago may have a negligible effect on your credit score overall. Your credit score before the late payment is also a contributing factor of how severely this payment will affect you. If your other accounts are currently in good standing, your recovery time should be shorter.
What Happens When Your Account Goes to Collections?
After a period of delinquency, your credit card company will write your debt off of their books, sending it to a collections agency for further pursuit. This is known as a charge-off. Once your account goes to charge-off, it is practically impossible to recover from, even if you pay off the debt. This will remain on your report for 7 years and you will be viewed as a higher risk. The answer: do everything in your power to not allow an account to go to collections; the financial impact is far worse than working with the credit card company for a solution that benefits all involved. Remember, they want their money too, so working with you is in their best interest as well.
How Do You Recover From a Late Payment?
After a year, the damage from your late payment should be reduced considerably. The best thing you can do after a late payment is ensure that you don’t acquire any further late payments on your report. Late payment history will remain on your file for a total of 48 months, after which your credit score should have completely recovered. If this is a one-time thing, many lenders will erase a late payment as a sign of goodwill. Should you find yourself in this situation, check with them–the worst they can say is no. Once you are entirely caught up, be sure to obtain a copy of your report to confirm all payments have been applied and that there are no mistakes.
Have you been late on a credit card payment before? Were you able to work out a solution with your lender? What did you do to speed up the recovery time?