If you miss a loan or credit card payment, it’s not the end of the world. The lender or creditor will likely assess a late payment penalty and initiate contact with you to collect the past-due balance. But if the account remains delinquent for an extended period, they will report it to the credit bureaus.
Even if it’s a mishap on your part, just one late payment can have serious consequences for your credit score. Here’s what to know about delinquent payments, how long they stay on your credit report and strategies to avoid this issue.
What are Considered Delinquent Payments?
When you miss a payment due date, the account falls into “past-due” status. However, it becomes delinquent and is eligible for reporting to the credit bureaus after 30 days.
Late payments on loans and credit card accounts are fair game. These include personal loans, auto loans, home loans, private student loans, personal lines of credit and credit cards. (Note: Federal student loans only report after three consecutive missed payments).
Understanding Credit Reports
Credit reports provide a snapshot of how you’ve managed debt obligations over time.
The Importance of Your Credit Reports
The three major credit reporting entities – Experian, TransUnion and Equifax – create credit reports and use the data to generate your credit score. This three-digit number represents your creditworthiness and communicates the likelihood of you repaying your debts on time.
How Do Credit Bureaus Compile Reports?
The information included in credit reports is from information furnishers, typically creditors or lenders you have accounts with. They provide details regarding your account and your payment history. Most information furnishers send monthly updates to ensure your credit profile is current.
What is Usually Found on Your Credit Report?
Your credit report includes the following:
- Personal information: name, address, Social Security number, name of employer (if applicable)
- Credit accounts: opening date, loan amount or credit limit, current balance, payment history
- Credit inquiries: hard (voluntary) and soft (involuntary) credit pulls
- Public records and collection accounts: bankruptcies, foreclosures, judgments, liens, suits, wage attachments and collection accounts
How Delinquent Payments Affect Your Credit
A single late payment can derail your credit health. It depends on your credit score before the late payment appears.
How Delinquency Affects Your Score
Payment history is the most significant component of your credit profile. It accounts for 35 percent of your FICO score – the most prevalent model lenders and creditors use to make credit decisions. So, just one late payment can mean bad news for your credit score.
If your credit score is higher before the negative mark appears, a late payment can drop it by up to 100 points. But if it’s already low, the impact likely won’t be as significant.
The Severity of Late Payments
The severity of a late payment’s impact on your credit score can vary based on how late the payment is, how often you’ve been late and the amount you owe. The credit bureaus categorize late payments as 30 days, 60 days, 90 days or 120 days overdue. And if the past-due balance remains outstanding, they may write the account off as a bad debt, which would appear as a charge-off in your credit profile. More on the impact of a charge-off shortly.
How Long Do Delinquent Payments Stay on Your Credit Report?
Late payments linger on your credit report for up to 7 years from the original date of delinquency, even if you bring the account current after the fact. However, the impact diminishes over time, assuming you responsibly handle your other debt obligations.
If the account is charged off, this negative mark will also stay on your credit report for seven years. The same applies to collection accounts, foreclosures and Chapter 13 bankruptcies. (Chapter 7 bankruptcies have a slightly more extended reporting period of up to 10 years from the filing date).
Factors Affecting the Duration of Delinquencies on Credit Reports
Varying Delinquency Levels
As previously mentioned, late payments can appear on your credit report at the 30, 60, 90 and 120-day mark. The impact depends on how long the delinquent balance remains unpaid. Generally speaking, accounts that are 90 or more days delinquent most significantly impact your credit score.
Impact of Serious Delinquencies
Late payments aren’t necessarily minor, but collections and charge-offs are far more serious. Foreclosures and bankruptcies also fall into this category and can make it more challenging to bounce back financially.
Can Delinquency Be Removed from Credit Report?
Ideally, you want a delinquency removed from your credit report once it’s resolved. But it’s not always so cut and dry.
Can You Get a Late Payment Removed from Your Credit Report?
Only inaccurate or unverifiable information can be removed from your credit reports by law. So, if you actually let the account fall behind, the late payment technically doesn’t qualify for deletion. That said, there are loopholes to have it removed. More on this shortly.
Will Paying Off a Delinquent Account Remove the Payment History from Your Credit Report?
Unfortunately, late payments don’t automatically vanish into thin air once you pay them off. Instead, they linger for up to seven years from the original date of delinquency. But there are ways to potentially have negative marks removed.
The Process of Removing Delinquent Payments
Here are some tips you can use to have late payments deleted from your credit profile.
Paying Off Delinquent Debt
You can pay the past due balance and ask the lender or creditor for a goodwill adjustment. It is when a lender agrees to remove a late payment or other negative mark from a credit report.
Goodwill adjustments are made as a gesture of goodwill in response to a borrower’s request, often made through a goodwill letter, where the borrower asks the creditor to forgive a minor mistake, such as a missed payment, in light of their overall good payment history.
Remember that the lender or creditor isn’t obligated to approve your request. You may need to try several times to receive a favorable response.
Regarding collection accounts and charge-offs, paying the balance in full won’t make it disappear. However, the account will appear as “paid” instead of “settled,” which lenders and creditors view more favorably.
How To Dispute Delinquencies on Your Credit Report
If you believe there’s a delinquency error on your credit report, you have the right to dispute it. To file a dispute, follow these steps:
- Review your credit report carefully and highlight or circle any inaccuracies.
- Gather all documentation that supports your claim the delinquency is inaccurate.
- Contact the credit reporting agencies directly to initiate a dispute. You can do this online, by phone or via mail.
Here are the methods of dispute by credit bureau:
Equifax
- Mail: Equifax Information Services LLC, P.O. Box 740241, Atlanta, GA 30374
- Online: https://www.equifax.com/personal/credit-report-services/credit-dispute/
- Phone: (866) 349-5191 or the number listed on your credit report
Experian
- Mail: Experian, P.O. Box 4500, Allen, TX 75013 or the address listed on your credit report
- Online: https://www.experian.com/disputes/main.html
- Phone: (888) 397-3742 or the number listed on your credit report
TransUnion
- Mail: TransUnion Consumer Solutions, P.O. Box 2000, Chester, PA 19016-2000
- Online: https://dispute.transunion.com/
- Phone: (800) 916-8800
If a creditor acknowledges an error or the credit bureau’s investigation finds that your dispute is valid, the incorrect entry falls off your credit report, potentially improving your credit score. Accurate delinquencies, once confirmed, will remain part of your credit history until the seven-year period elapses.
*Note: If you use the online dispute option, you automatically waive the right to a re-dispute if the credit bureaus do not rule in your favor.
Steps to Avoid Future Delinquencies
There are several ways to stop late payments from tarnishing your credit health.
Tips for Timely Payments
A few strategies to consider:
- Set up automatic payments: Enroll in your lender’s automatic payment feature to ensure payments get processed on or before the due date. Automatic payments help avoid accidental late payments that could tank your credit score.
- Schedule payment reminders: Set alerts on your smartphone to notify you several days before your bills are due. You can also use your financial institution’s bill payment feature to stay on top of your bills and avoid missed payments.
- Budget wisely: Regularly review your finances to ensure you have adequate funds to cover your upcoming bills. Depending on where you stand, you may have to make cuts to afford your monthly bills comfortably.
- Review your billing statements: Check each bill for accuracy to confirm that no errors exist that will lead to unintended missed payments. You should address any discrepancies promptly with your creditor.
Seeking Professional Financial Help
If you’re overwhelmed by consumer debt and struggling to make timely payments, consider working with a credit counselor to find relief. They can assess your financial situation free of charge and offer strategies to manage your debt load and get you back on track.
There are also credit restoration experts like The Credit Pros that can help you avoid future delinquencies and improve your financial situation. With their personalized solutions aimed at achieving fast and effective results, you can develop a plan to rebuild your credit and achieve financial stability. Don’t let past mistakes hold you back – take proactive steps towards a better financial future by contacting The Credit Pros today.
Get a free consultation with no obligation to sign up and learn how they can help you improve your credit score fast. With their 100% 90-day money-back guarantee, you can trust that they are dedicated to helping you succeed. Call (727) 306-8201 or fill out a form to get started today with The Credit Pros.
