If you are late on payments in any of your credit accounts, it will not only cost you more money to pay off, but it will also hurt your credit score. It could damage your credit report once that information is sent to the credit bureau. And it stays there for a pretty long time, affecting both your credit and finances.

What is Considered a Late Payment, and When is it Reported to the Credit Bureau?

Lenders consider a late payment as an occasion when you miss your payment at a specified time, even just by a day. However, your lenders do not report your late payments to the credit bureaus right away, but only after your payments are 30 or 60 days late.

For your service utility accounts and phone contracts where you also have recurring monthly bills, they do not report it until your account is delinquent and your services are already terminated.

You may consider the time between your first day of late payment to the time your lenders send a report to the credit bureau as your make up period. You are encouraged to try your best to keep your account current to avoid the permanent damage of that late payment information showing up in your credit report. A caveat, paying anything less than the due amount that you are due to pay based on your statement of account is still considered a late payment. 

What Fees are Charged to Late Payments?

Even if your late payments aren’t reported until the 30 or 60-day mark, you are sure to be slapped quickly by your creditors with late penalty fees. This becomes a real problem since missing your payments in the first place means you lack the funds to pay it on time; with added interest charges, this will cause more money to be paid off at the end of each billing cycle.

What are these fees?

Late Fees

Credit cards charge a late fee that can range from $28 – $36. On the first offense, your credit card company can charge a fee of $28. If you miss the second or third time, they can increase your fee to $39.

Some exceptions may apply, especially if you’ve never missed a payment before. You can request your late fees to be waived when you are certain your late payment is just a one-time situation.

Penalty APR

When your payment is 60 days late, Penalty APR that is as high as 29.99% will now apply. Penalty APR is considered as the highest rate to be charged on your account. Issuers will keep the penalty APR in place for six months before they review your account and decide to revert your interest to regular APR or keep it as is.

If you are missing several payments on your credit cards, your earned rewards may also be affected. Issuers may block your access to your rewards, or freeze them until payments are made current. They will only reinstate your rewards based on their discretion, subject to reinstatement fees. 

How Long Do Late Payments Stay on Credit Reports?

Even a single misstep in your payments can stain your healthy credit a great deal. The topmost influence in calculating your credit score is all about payment history — that is why once your lenders send that late payment information to the credit bureaus, it will stay there for seven years. During this long period of time, this is what you can expect:

• Severe drop on credit score. Because of the initial impact on your credit record, your credit score will follow suit and experience a drop of at least 90 – 100 points.
•  Very limited credit opportunities. Thereafter, you’ll find your credit world to be constricted, losing opportunities on loan programs and low-interest rates. If you are planning on moving home, even as a renter, you might find it hard to get approved with a low credit score.
• Job applications may also be affected. Recruiters and employers are now giving your credit records a close look when deciding whether to hire you or not.  

The impact of late payment information on your credit record will diminish over time, especially if during the seven years, you have made numerous positive actions to rebuild your credit.

How Can Your Credit Score Recover From Late Payment History in Credit Report?

Even when the damage has already been done, know that you can still work on ways to help your score bounce back and lessen the negative impact on your credit report.

The good news is that your credit score can move quickly in the direction of any positive action you do towards your credit accounts. And as your lenders send credit information regularly to credit bureaus, the build-up of those positive actions will inevitably cause a credit score hike.

Address Your Credit Score Risk Factors

It is important to get to know your credit report and fully understand what’s in it that causes it to give you a low credit score. Address these areas that make up your credit score and find ways to improve each of them: payment history, credit utilization, credit history, credit mix, and new credit.

Paying Off Your Debts in Collection

Paying your debts in a collection not only improves your payment history, but it also improves your finances. Take advantage if the settlement offers of your collection agency and bargain for more discount if applicable. Paying off your debts in a collection the soonest time possible is one less negative report on your credit record.

Improve Your Credit Utilization Rate

Second to payment history as the most influential factor in the score calculation is credit utilization. This is 30% of your credit score. If you make this area a priority for improvement, you may just see a remarkable improvement in your credit score as well.

Your payment history is 35% of your credit score. With at least a third of your overall creditworthiness represented by a 3-digit number, no wonder your late payments can cause a major setback on your credit. But know that even small positive steps in credit management are enough to take you towards that point of recovery your credit badly needs.