You may be one who pays all your bills on time every month, but maybe you had a financial emergency or even an oversight that caused you to pay one late payment.
If you miss a payment on one of your credit cards, mortgage or any other loan, you could see a drastic drop in your credit score. Having a late payment may cause lenders to look at you less favorable, even it is was just one late payment.
Banks use the information on your credit report to determine the risk of the borrower, therefore the payment history has the strongest impact on your credit score. You may have a history of years of on-time payments, but unfortunately, they will look at the most recent history of the missed payment as a greater risk.
How Will One Late Affect Your score
When a lender looks at your FICO credit score, the late payment will be evaluated on how severe the late is, how recent it is. According to FICO data, one 30 days late payment could cause as much as 90 to 110 point drop on a FICO score of 780, for a consumer that has never missed a payment. The higher the credit score you have, the more significant impact it could have on your credit score. While a consumer with a 680 FICO score and two late payments, may experience a 60 to 80 point drop after receiving another 30 days late.
I recently had a friend who had a score of 720, and she made an error in paying her car payment, and it dropped her score by 100 points. She didn’t have any collection items reporting; all her credit cards were paid to a $10 balance. That one late payment tanked her score.
Each credit reporting agency has its algorithm to come up with your credit score, depending on what report you pull and when your scores may vary with each report. Each time a report is your credit score will be refigured so that the recent information will be calculated in the score.
What to do after a late payment
If you have missed a payment, it is important to try not to let things snowball. It is important that you continue to pay all current accounts on time, and not let yourself get behind on them.
Things you may want to consider doing to keep bills current.
1. Make a budget or a calendar with the due dates of all accounts.
2. Continue paying all bills on time.
3. Take a look at setting up payments on automatic bill pay.
4. Contact Creditors to work out a payment plan on any accounts that you may be behind on.
5. Monitor your credit report regularly.