Falling behind on payments will have a negative impact on your credit score. They stay on your credit report for seven years, but luckily, the impact of late payments has less influence over time. This guide will explore how late payments affect your score, ways to deal with them, and how to avoid them in the first place. You will also learn about a special case when you can remove late payments from your credit history.
The Basics of Credit Reports
Credit reports are valuable documents that can improve your finances and help you save money. Here’s how they work.
What is a Credit Report?
A credit report is a document that contains your credit history. You can see any loans or lines of credit you have taken out, as well as information about your payment history. This report also includes your credit score, a critical number that many lenders look at before giving out loans. A higher credit score translates into lower interest rates for loans, so staying on top of your credit score can help you save a lot of money in the long run.
Credit reports also allow consumers to detect identity theft. You may find suspicious activity in your report, like loans you never took out. It is a good idea to contact your bank and the authorities about any suspicious activity.
Who Compiles Your Credit Report?
The three major credit bureaus compile credit reports for each consumer with credit history. These three bureaus — Equifax, Experian, and TransUnion — are industry leaders who are required to give you a free copy of your credit report every year. You can request a copy of your credit report from one of the three credit bureaus every four months to get more frequent updates without paying any money.
Late Payments and Credit Reports
Payment history is the biggest component of your credit score. It makes up 35% of your total score, and late payments will show up on your credit report. Here’s what you need to know about them.
How Late Payments Show Up on Your Credit Report
Creditors aren’t in a rush to notify the credit bureaus about any late payments. Many of them give borrowers up to 30 days after the due date to catch up on the payment before reporting the activity to the bureaus. Some creditors are more generous and extend the deadline a little more.
How Different Types of Late Payments Can Vary in Duration
Late payments will stay on your credit score for seven years. The only exception is a Chapter 7 bankruptcy, which will stay on your credit report for up to 10 years.
How Long Do Late Payments Stay On Credit Report?
Any missed payments stay on your credit report for seven years. You can’t get them off your credit report any sooner if these late payments are legitimate.
Do Late Payments Affect Your Credit Score?
Your credit score is a vital financial number that impacts your access to capital, ability to get your tenant application approved, and overall expenses. Here’s how late payments affect your credit score.
The Consequences of Late Payments
Late payments will have a negative impact on your credit score. While the amount of points you’ll lose varies based on your financial situation, current score, and other factors, it’s possible to lose anywhere from 50-180 points from a late payment.
It’s possible to recover from a late payment, and you can still get loans. However, you will have to contend with higher interest rates as you repair your credit. Lenders may also put lower limits on how much you can borrow if you have a low credit score. Even if you don’t plan on applying for a loan anytime soon, late payments can still hurt. Landlords look at your credit score during the tenant application process, and you can even end up with higher utility bills if you have a low credit score.
Late payments get worse if you let them compound. While it’s doable to recover from one late payment, it becomes more difficult if you regularly make late payments that get reported to the major credit bureaus. You will also have to contend with late fees and a rising balance on your credit card account.
The Long-term Effects of Late Payments
Late payments have a substantial effect on your credit score when they occur. Their effect wears off before seven years, but lenders will still see them on your report until seven years pass. Falling behind on payments can have a severe impact on your credit score if you continue to fall behind without adjusting your financial habits.
Tips for Dealing with Late Payments on Your Credit Report
Having a plan to deal with late payments and mitigate risk can lead to a higher credit score and access to more capital. These are some of the ways you can deal with late payments.
How to Mitigate the Effects of Late Payments
You can minimize the impact of a late payment by making on-time payments for everything else. Lenders will look at your late payment, but if it’s a one-time occurrence rather than a bad habit, you may get a good rate for your loan.
Creating a Plan to Avoid Future Late Payments
A late payment is bad enough, but incurring numerous late payments can put your credit score and finances in a rough spot. Assessing what caused the late payment to take place can help you avoid it in the future. If you had the funds to make the payment but forgot about it, you can send a monthly reminder on your smartphone to make your payment.
If you don’t have enough money for the payment, you may want to consider picking up a side hustle to cover expenses. While a side hustle can offer immediate relief, you will do better in the long run if you can seek career advancement opportunities. If your current employer won’t pay you more, you may want to consider job hopping.
Disputing Late Payments on Your Credit Report
If you believe a late payment on your credit report is inaccurate, you can dispute it with the credit bureaus. If you dispute the late payment with one bureau and get it removed, the other two credit bureaus will update their records.
If you don’t know where to start, contact The Credit Pros today for personalized solutions and expert guidance on disputing late payments on your credit report. With their proven track record of fast and effective results, you can trust that they have the expertise to assist you in removing any negative items from your credit report and improving your overall financial situation.
Call (727) 306-8201 or fill out a form to get started on disputing late payments with The Credit Pros. With their 100% 90-day money-back guarantee and affordable pricing with no long-term contracts, you can trust that they are committed to helping you succeed and improve your financial situation.
When and How to Dispute Incorrect Late Payments
You can only remove a late payment from your report early if it is inaccurate. You will have to send a letter to one of the major credit bureaus disputing the error. Gathering supporting documents will make it easier to demonstrate why the late payment is an error. You can dispute your incorrect late payment online or by mailing the major credit bureau with the inaccurate information. Each credit bureau has a different address and online form for disputes.
FAQs About Late Payments on Credit Reports
You can only get a late payment removed from your credit report if it is inaccurate. The credit bureaus remove late payments from your credit report after seven years.
Lenders can look as far back as seven years for late payments. Any late payments that were incurred more than seven years ago will not show up on your credit report.
