How Late Payments Can Affect Your Credit
Though you may be paying all your bills on time, anything unexpected such as financial emergency, lost job, or a simple oversight can make you fall behind on your payments. When you miss even a single payment, be it a credit card, mortgage, or a loan, your credit score will drop, due to which lenders will consider you less favorable.
When applying for a loan, lender will use the information on your credit card report to measure your risk as a borrower. Your previous repayment history has the strongest impact on your credit status. While having a history of making on-time payments will suggests that you will make repayment on time. This will help you in finding a loan with favorable terms and rates.
When you delay your repayment for more than 30 days, the lending company will report about it to the credit report agencies. Once reported, it will become visible in your credit score card. Such report listed in your credit will be based on how late you are in repaying the loan.
Repaying back late will definitely hurt your credit score and affect your overall financial health. Be it a lender, broker or banks, all credit issuer will consider payment history and evaluate your credit score ahead of deciding whether or not to offer you a loan approval. A steady history of making timely repayment will suggest that you are a reliable borrower, whereas a poor history of missed payments suggests that you may not be able to make repayment on time. Being irregular with repayment will be considered as a red flag by the lender. Even if you are delayed by a single day to pay your bills, you will be charged with a late fee and it will reflect on your next billing statement.
Repaying late will result in an increase in the interest rates, which can make the cost of the loan extremely high. Such mistakes will end up in your credit report. Such report in your credit can stay in your credit report card for years. One single late payment is enough to drastically lower your credit score. Making late payment can be a dangerous habit.
If you have already made the damage by repaying late then you can do the following-
- If you have good standing with the bank or credit company you can request removal of the late payment fee.
- You can also work to reset your penalty interest rate. When you make late repayment and your interest rate increases, the issuer is required to reset the interest rate back to the pre-penalty rate if you have made consecutively six months of on-time payments. So, get back on track and start making on-time payments.
- Start paying all accounts on time. When your credit score has drooped due to late payment, the best thing you can do is to start making on-time payments on all of your active accounts. Continuous on-time payments will help you improve your credit score gradually.
- The best way to prevent late payment is to set up automatic repayments and email or text reminders for all your financial accounts.
- Lastly, keep a track of all your credit health by checking your free credit reports frequently. All the precautionary measures will help you keep an eye on your payment history. Besides, making timely repayment will help you build good credit history and improve your bad credit score with time.