Say you accidentally missed one credit card payment. How much or how little does that impact your credit score? There are many factors involved in the determination, but the bottom line is, the better your rating, the deeper the dent.
Often 30-day grace
Making payments on time is, of course, the best defense in keeping up your FICO score. But everyone makes mistakes, and unforeseen emergencies do occur. The good news is, if you correct the oversight within a month, you are probably safe.
Anthony Sprauve, director of public relations for MyFico.com, said:
“Most lenders do not report missed payments until the account is 30+ days past due. Suppose a given credit card payment is due on May 15th, the payment is made on May 25th. Technically, the payment is late, and fees and interest charges may apply. But in most cases, this late payment would not be reported by the creditor to the credit reporting agencies.”
Barry Paperno, of Credit.com, said that the answers to three questions go into to determining the impact of a missed payment. (1) How recent is the late payment? (2) How severe were the late payments? (3) Did more than one account have a late payment?
According to Paperno, the answer to the first question has the greatest impact. And it hurts the worst the better your score:
“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, … a recent late payment can cause as much as a 90-110 point drop on a FICO score of 780 or higher. … This information will remain on your credit report for seven years.”
A single late payment also has the inherent danger of snowballing into a much larger financial issue. Being behind makes it harder to catch up, triggering fees and rate increases that can grow into a completely unmanageable debt spiral.
Making an estimate of the impact to your FICO score is difficult, since the credit reporting agencies do not make their criteria public. The closest one can get is by using the online FICO Score Simulator.
Finally, the only sure way to completely avoid a hit is to diligently pay all your bills on time. However, if you do have a slip, it never hurts to call the creditor and explain your situation. Often they will remove the late hit if your reasons are good and you have been timely in the past.