How Long Do Late Payments Stay on Your Credit Report
Many people often ignore paying their bills on time, especially when the amount due does not seem like a big deal. But unknown to them, that behavior can cause an impact on your creditworthiness as a whole.
What is Considered a Late Payment?
A late payment is a payment on your credit bill that is paid on the day after it was due. Some lenders allow a grace period, typically 15 to 30 days, where you can make up for payments without charging you late fees. When your bills remain unpaid, the lender starts to report this information to the credit bureaus. In most cases, even if you have made payments within the grace period, but with an amount below your outstanding bill, it would also be considered a late payment.
How Long Do Late Payments Stay on a Credit Report?
When you make up paying your credit balances within the grace period, your lender will not report that late payment to the credit bureaus. However, once the late payment has been reported, that information stays on your credit report for seven years, and later falls off automatically.
Late payments are likewise categorized on your credit report by the number of days late – 30 days, 60 days, 90 days, 120 days, and 150 days. Charged offs also fall within this category. A charge off is when your creditor has finally considered your account as a loss or bad debt, and have written it off in their receivables. In this case, your account will be closed, although you still owe the debt.
How Do Late Payments Affect Your Credit?
Your credit account will remain active as you make up for your late payments and even when your late payments have already been reported to the credit bureau. But other negative consequences will start to affect your credit account as a result of that mishap.
Late fees are added to your account. For a credit card account, those fees could be within the range of $25 to $39.
Payment history is the top-most factor involved in the calculation of your credit score. With that said, late payments can cause your score to drop by 90 to 110 points. Typically, those with credit scores within the high range experience a higher score drop than those within the lower range.
When you are delinquent in your account for more than 60 days, your lender may apply the penalty interest rate. This is considered to be the highest interest rate, going as high as 29.99%. Likewise, your lender will not revert to your regular interest rate until you have made on-time payments for at least 6 to 12 months.
Termination of Account
The added fees and higher interest rates will eventually make repayment of your account a struggle. When that happens, you are more likely to default on your account, causing that account to get charged-off or terminated.
How Can You Remove Late Payments on a Credit Report?
You cannot remove an accurately-reported late payment of an account by your lenders. That information will remain on your credit report as part of your credit history, even if you make up for your late payments, and the account remains active.
You can, however, dispute with the credit bureau a reported late payment when you have actually paid on time. According to Important Credit News, you are entitled to request your credit report from the credit bureaus for free every twelve months. You can make your request by phone, mail, or online. You may also file your dispute using the same methods. Provide all the necessary supporting documents that show when you have paid your lender.
Disputes take at least 10 to 14 business days upon receipt of your letter, depending on the nature of the dispute.
How Can You Avoid Late Payments?
Paying your credit accounts on time must always be your top priority. Here are some tips on how you can avoid late payments:
- Stick to a Spending Budget. Don’t make unnecessary purchases beyond your budget that would tap into your repayment funds.
- Sign-Up For Reminders and Alerts from Creditors. Your reminder for upcoming due dates may be in the form of emails, texts, or app notifications.
- Sign-up for Automatic Payments. You may authorize your creditor to pull payments from your bank accounts when they come due.
Be informed to know about the grace period on your account as they vary from lender to lender. Take proactive steps and write to your lender if the chances of being late on your payments are high. They may be able to give you an additional grace period to make up for payments, especially if the situation happened only once.
You should avoid making late payments on any of your credit accounts at all costs. If you do, it will create a domino effect, making it harder to keep up with your payments as well as recover from the damage it will have on your credit.