One of the scariest things about a late payment is having it reported to the credit bureaus and knowing it is going to hurt your credit score. The late fee, you can pay and be done with it. However, once a late payment goes on your credit report, it will be there for seven years, revealing your mistake to anyone who checks your credit report during that period.
Late payments are reported to the credit bureau and added to your credit report at least 30 days after the payment due date. Some creditors or lenders may not report late payments until they are 60 days past due. Your creditor can tell you its policy for reporting late payments to the credit bureaus.
Because of the way late payments are reported, you get somewhat of a grace period for being late without having it affect your credit. If you are only a few days or a couple of weeks late on your payment, you can dodge having the late payment placed on your credit report as long as you make up the payment before the 30-day mark. Make sure you make the full missed payment to keep the late payment off your credit report. Paying anything less than the minimum balance due is still considered late.
Some accounts may not report late payments to the credit bureaus at all. For example, your utilities and cell phone late payments probably won't go on your credit report unless you completely default on the account. If you're so delinquent on these payments that your services are disconnected and you never have them restored, there's a good chance your account will be reported to a debt collection agency. Accounts that are placed with collection agencies have a good chance of being placed on your credit report as a debt collection.
Additional Monetary Penalties
Though a late payment won’t go on your credit report until you’re 30 days late, you can still face other consequences of the late payment. You can be charged a late fee, sometimes the minute after your payment is late.
Then, once you’re 60 days late on your credit card payment, your credit card issuer can apply the penalty rate to your balance each month until you’ve made six consecutive timely payments. Even when the rate goes back to normal for your old balance, purchases made after the penalty rate became effective may still be subject to the higher interest rate depending on your credit card terms. Plus, the penalty rate may also be applied to other accounts you have with the same credit card issuer.
If you catch up by making the full minimum payment before your next payment due date, your next reported account status will show that your account is current. However, the previous 30-day late payment will stay on your credit report for the credit reporting time limit, which is seven years.
On the other hand, if you miss your next payment, a 60-day late payment will be added to your credit report, then 90, 120, 150, and 180 days late. At 180 days late, your account will be defaulted or charged-off. You bring your account current again anytime before the charge-off. Unfortunately, once the account is charged-off, there’s no opportunity to catch up on payments and get your account back into good standing. The account is closed, and the status will be reported as charged-off.
When Does It Hurt Your Credit Score?
Your credit score will be impacted at the time the late payment shows up on your credit report. For example, if you access your credit score the day before the late payment appears on your credit report and the day it appears, you’ll see the exact impact to your credit score.
Because payment history is 35% of your credit score, late payments can cause your credit score to drop by dozens of points. Unfortunately, your credit score won't immediately recover when you catch up on the payment since catching up doesn't erase the payment from your credit history.
Can You Remove a Late Payment?
If the late payment was reported in error, you could dispute it with the credit bureau to have it removed from your credit report. Provide proof of the error, like a copy of the check used to make your payment, to help your dispute. Accurately reported late payments could rightfully stay on your credit report for seven years. There’s a small chance your credit card issuer may be willing to remove the late payment as a courtesy, but you’ll have to ask.