Having a credit card or loan requires careful budgeting and planning, so you can get it paid off responsibly. Installment loans, such as car loans, have a set amount you pay every month. This amount is decided in advance of you accepting the loan terms. A credit car loan is different because the monthly payment varies based on your balance. Some credit card lenders use a percentage of what you owe plus the monthly finance charge. As the balance goes up or down, the minimum payment due will change also. With a credit card payment, you can always pay more than the minimum amount but not less.
Whether it’s an installment loan or a credit card loan, due dates must be adhered to. However, sometimes circumstances may occur, and you end up being late making your payment. Some of these reasons could be anything from you forgetting the date to you not having the funds at the moment. The question is, how does a late payment affect your credit score? Let’s take a look.
How Does a Late Payment Affect Your Credit Score?
The effects of a late payment on your credit score can be devastating and long-lasting for some people; others may be able to get by with minimal issues. It all depends on your current credit situation and history. According to FICO, the score will impact people differently based on their previous risk assessment. If they already have a lower score and are considered riskier, one late payment may not harm them as much as someone who has a higher score with no delinquencies. Also, if someone doesn’t have many accounts or a long history, they will be affected more than someone who does.
You may see anywhere from a 30 to 65-point drop when missing a payment by 30 days. If you miss for more than that, the score is further harmed.
How Long Will a Late Payment Affect Your Credit Score?
The appearance of a missed payment will stay on your credit report for seven years. However, with good habits, you can bring the score back up sooner than that. Paying down your loans so your credit utilization rate is decreased is one way to do that.
Tips for Making Payments On Time
The key to keeping your credit score in good shape is to be sure to make all your payments on time. There are some tips you can use to help you accomplish this goal, such as:
- Setting up automatic payments — most loan payments have an option for you to make automatic payments. You will have to create an online account or register for online access. Once you’ve accessed your account, go to the payment section and select the automatic payment option. You’ll need to supply your bank routing number, so be prepared with the information.
- Setting reminders — If you don’t want to set up automatic payments, you can set yourself a reminder on your phone. Most smartphones have reminders in the calendar app.
- Paying early — Another option is to pay as soon as you get the bill. Even though this will be paying early, it will ensure you get it there without being late.
Get in Touch With Credit Diva of Dallas
Having a late payment on your credit score can cause it to drop. While you can't go back in time to reverse it, you can make moves to improve your credit score and your financial habits in the future.
Take charge of your finances by getting in touch with Credit Diva of Dallas. Our credit repair program will assist you in taking control of your finances in a proactive way. With credit repair, you can secure the best interest rates. Get in touch with Credit Diva today for more information.