What is Co-Managed Care for Veterans?

One Late Payment Can Hurt Your Credit Score

Have you ever had the sinking feeling that you’ve forgotten something important? If that “rocks-in-your-stomach” feeling has ever struck you as you’re opening your credit card statement, you are not alone.

According to a 2009 Financial Literacy Survey by the National Federation for Credit Counseling, 15 percent of American adults, or nearly 34 million people, were late making a credit card payment at least once. Eighteen million people (8 percent of American adults) have missed a credit card payment entirely. What’s more, 26 percent of Americans, or more than 58 million adults, admit to not paying all of their bills on time. Among African-Americans, this number is at 51 percent.

Even the very best juggler drops a bowling pin now and then. So you’ve missed a payment. What does this mean? How does one late payment affect your credit score As is the case with a number of credit-related issues, the answer is: It depends.

One credit web site offers three questions that can help you gauge the possible impact of a late payment to your credit score. These questions are:

  1. How long ago did the most recent late payment occur?
  2. How severe were any late payments (30 days, 60 days, charge off, etc.)?
  3. How many accounts on the credit report have had late payments?

Timing of the late payment is usually the variable that has the biggest impact to your credit score. For example, if you made one late payment two months ago, it can trigger a 100 point drop on a FICO score of 780. But if you made one late payment five years ago, and have made on-time payments ever since, that single late payment will have little negative effect on your score. Negative hits will decrease over time, but the information will stay on – and impact – your credit report for seven years.

A few other factors that can contribute to determining how much hurt a late payment will have on your scores:

  • Length of your credit history – the longer the better.
  • Other delinquencies, collection references, outstanding balances or other adverse legal issues on your credit report.
  • Number of other accounts that are listed as “currently paid as agreed” – the higher the better.
  • Your current FICO score. If your FICO score is really high, you will endure a bigger hit for a single late payment than someone with a lower score. In this instance, the saying “the bigger they are, the harder they fall” is highly applicable.

If you make a late payment, one thing you might consider doing is contact your creditor as soon as possible. If you can offer a solid explanation for your error and can convince the creditor that it’s not going to happen again, you may be able to persuade them to remove the incident from your credit report.

If you do find yourself talking with a collections agency, don’t despair. There are a few distinctions between civilian and military debt collection that, as a member of the military, you should be aware of.

A single late payment is not necessarily the end of the world, but it is a gamble. If – and only if – you’re lucky, the creditor won’t report that you were late. Most lenders don’t report missed payments until the account is more than 30 days past due. But that’s not something to count on. The best way to protect yourself is to make every payment on time.

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