Have you made late payments on your credit cards or a loan — and wondering how long they will stay on your credit report? Read on to find out more.
If you’ve made a late payment on one of your credit cards, or even a loan, it’s important to know that you’re not alone. There are a number of different reasons that people make late payments — the loss of a job, large unexpected expenses that pop up, or sometimes we just forget. After all, we’re all human.
More than half of Millennials report making late payments, so it’s important to know how this can affect your credit report and your credit score. In this article, we’ll explore how long a negative mark from a late payment will stay on your credit report, as well as how it can affect your everyday life.
How long does a late payment stay on your credit report, and why is it important?
Unfortunately, there is no single “set” rule for all creditors when it comes to how long a late payment will stay on your credit report. Each lender has their own threshold for what counts as a late payment, as well as at what point they decide to report these late payments to the credit bureaus. While this can be frustrating, it’s important to know that there are some tried and true industry averages that can be applied.
In most cases, once your payment gets to be 30 days past due, lenders will consider your payment “late” and will report it to the credit bureaus. Once this happens, the late payment will almost likely show up on your credit report. But why is this important? Simple — even a single late payment can have a big impact on your credit score.
Let’s take a closer look at some data. We talked to 500 Credit Sesame members to find out how late or missed payments affected their credit score.
Late Payment Delay & Credit Score Drop
|Late Payment (Days)||Average Credit Score Drop (TransUnion)|
|30 Days||25 Points|
|60 Days||45 Points|
|90 Days||65 Points|
|150 Days||100 Points|
|Charge Off||150 Points|
As you can see above, even missing just one monthly payment can drop your credit score by 25 points. And, depending on where your credit score started, this could be enough to drop you into a lower credit score range — which can bring about a whole other list of complications.
As you can also see, your credit score continues to drop the longer your payment remains past due, so it’s important to work with your creditors to find a payment plan that will work for you. In the worst case scenario, your lenders will often charge off your account — and you can expect to see a 150 point drop in your credit score.
Once you have a late payment on your credit report, it will most likely stay on your report for 7 years from when the account first became late, or delinquent.
How do late payments affect your credit score?
As you know, your credit score is more than simply a number — rather, it is a 3-digit score used by a number of lenders and creditors to quickly determine your creditworthiness as a borrower. Your credit score can affect a number of things in your everyday life: whether or not you are approved for that new credit card, the interest rate you will pay on your credit cards, whether or not you can get approved to purchase a new car or home, or even whether or not you get hired for a new job.
We’ve already talked about how your credit score continues to drop the longer your payment is late, but did you know that your credit score will also continue to drop with each missed or late payment? Take a look at the data below:
Average drop in credit score after missing a payment
|Credit Score Ranking||6 Months with One Non-Payment||12 Months with Two Non-Payments||24 Months with Three Non-Payments|
|Very Good (750+)||702||694||671|
As you can see above, the ones who have the most to lose when it comes to making late payments are those who currently have the best credit. Those who started out with excellent credit (a score of 800+) immediately dropped to very good credit with just one non-payment in a 6 month period. Fast forward to 24 months with three non-payments, and their scores are barely hanging on in the good credit score range.
And while this may not seem like a big deal, it can actually have serious financial ramifications. The interest rates offered to those with good credit and to those with excellent credit can vary greatly, and can end up costing a significant amount in interest over the life of a loan.
We talked to Credit Sesame member, Peter, about how his missed payments affected his credit. Here’s what he had to say.
Peter’s missed payments had him facing an uphill battle
Description: In this case we have Peter, who has been with Credit Sesame since 2016 and has utilized it to monitor his credit scores and get recommendations for credit cards.
|Starting Credit Score||September 2016||-||670|
|Late Payment (Student Loan)||October 2016||-85||585|
|Paid Bills & Automatic Payments||November 2016||15||600|
|Credit Request (Credit Card Application)||December 2016||15||615|
|Authorized User (2 Credit Cards)||January 2017||100||715|
|Collections (Paid Off)||March 2017||30||745|
|Credit Utilization (Below 30%)||April 2017||10||755|
What can you do about late payments already on your credit report?
If you already have late payments on your credit report, you may or may not be able to have them removed. If your bills are past due, it’s important to understand that the sooner you can pay them off, the better off you will be.
However, if you want to take this a step further and remove a late payment that is already on your credit report, you have a few options:
- Write a letter of goodwill. There’s no guarantee that this tactic will work, but you can always try writing a letter of goodwill, outlining your history with the lender and explaining the situation that led to your late or missed payment. In some cases, owning up and taking responsibility for your missed payment will be enough to get you off the hook — but don’t count on it. You will likely have a better chance of success if your history with the lender is otherwise spotless (or close to it).
- Negotiate with your lender. There have been some reports of success by negotiating with your lender. Perhaps they will agree to remove the late payment from your credit report if you agree to stick to a set payment plan, or if you pay off the debt entirely. Whatever terms they agree to, be sure to get it in writing — and have it in hand before you pay off your debt.
- Dispute any errors on your credit report. If you find outdated or inaccurate information on your credit report regarding late payments, you have the right to dispute the error with the reporting credit bureau. If you lender isn’t able to verify the negative information contained in your credit report, they are legally obligated to remove it.
Wondering how many people have been successful in having late payments removed from their credit history? Take a look below:
Average percent of individuals who have had late payments removed from credit report
As you can see, the older generations stand a much better chance at having a late payment removed from their credit report (10% for the Silent Generation vs. 4 percent for Gen Zers, among Credit Sesame members). This is likely due to their long-standing credit history and longer track record of on-time payments.
How to avoid late payments
Believe it or not, avoiding late payments doesn’t have to be difficult or complicated. One of the easiest ways to make sure your payments are on time is to set up automatic recurring payments each month for the minimum amount due. That way, you can be sure that your payments are always on time, and you can always make any additional payments you want throughout the month, to lower your balance to a comfortable number.
Of course, not everyone wants funds automatically drafted out of their account each month — and that’s okay. If you would rather, simply set up a recurring monthly calendar reminder to make your payment, and then stick to the schedule. Some people even make a budget they look at on a monthly basis, it shows how much to pay and when to pay it. That way nothing is forgotten.
Another tactic to reduce the likelihood of a late payment is to simply reduce the number of bills you have to pay each month. Think about it… are you more likely to miss a payment for one credit card — or for four?
While all of this may sound tedious, the results speak for themselves. Take a look at the following data to see the average improvement to the scores of 600 members who missed a minimum of 3 payments over a 2 year period.
Average improvement to credit score after removing late payment(s)
|Credit Score Ranking before Non-Payment||6 Months after Non-Payment removed||12 Months after Non-Payment removed||24 Months with Non-Payment removed|
|Very Good (750+)||671||694||702|
While most members weren’t able to get back to quite where they were before their non-payment, everyone’s scores improved significantly over the course of 24 months by having their non-payment removed. In other words, it’s clearly best to not miss a payment in the first place; however, if you’ve already missed a payment, there are benefits to still working to improve your credit score.
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Benefits of learning about late payments
Since no one is immune to making late payments, it’s important that you understand the impact they can have on your financial health and future. Even a single late payment can haunt you for years (7, to be exact), causing you headaches and also costing you a significant amount of money.
To get an idea of a “real world” impact of late payments, we talked with 3 Credit Sesame members and followed their credit scores. As you can see, Member #1 and Member #2 both made late payments. Over the course of 5 months, Member #1’s score dropped nearly 120 points after making 2 late payments. Member #2 only made 1 late payment, and their score did not drop quite as drastically — it went from a high of 770 to just under 750 in 2 months, thanks to 1 late payment.
5 Month Late Payment Analysis & Credit Score Affects
|Credit Sesame Member||Month 1||Month 2||Month 3||Month 4||Month 5|
|Member #2||754||761||770 |
|Member #3||754||761||770 ||779||784|
Member #3’s story is quite different, having made no late payments over the course of 5 months. Instead of a drop, Member #3’s score rose 30 points in 5 months, by making smart financial decisions. As you can see, the difference at the end of five months is a whooping 147 points. Even between Member #2 and Member #3 there is a 35 point difference. All for just missing one or two payments.
Conclusion & summary
To quickly sum it up, the simplest answer is that, in most cases, a late payment will stay on your credit report for 7 years. Each late payment can have a big impact on your score, and your score will continue to drop the longer your account in delinquent. As the single biggest contributing factor your credit score, it is vital to stay on top of your payment history by making your payments on time, every time.
Whether you choose to set up automatic payments or prefer something as simple as a monthly calendar reminder, a little legwork up front can save you a lot of stress — and money — down the road.