If you have ever been late on a credit card payment, you've likely berated yourself for missing the due date, paid the late fee in addition to the minimum due and then moved on. However, it can have a bigger impact than you think, especially if you started off with an excellent credit score.
In a study by FICO, it was shown how something as little as one late payment on an account can have drastically different effects, depending on the borrower's credit score.
In the study, it was shown that a recent late payment will cause a borrower with an excellent score of 780 to see a 90 to 110 point drop in their score. Whereas, in comparison, a borrower with a score of 680 will only experience a reduction of 60 to 80 points off their score.
Why do borrowers with excellent credit lose more points than someone with a lower score? Because borrowers with lower scores have already shown riskier past behavior, so the addition of one more indicator of increased risk on their credit report is not quite as significant as it would be for a borrower with an excellent credit rating.
According to Barry Paperno, community director for Credit.com, "While any negative score impact from a late payment lessens over time, this information will remain on your credit report for seven years and can be expected to continue to impact your score, at least to some degree, for much of that time."
I've Already Had a Late Payment
For borrowers that have already made a late payment, there is a chance that it won't be reported to the credit bureaus, but usually there will need to be certain factors at play.
- According to Anthony Sprauve, director of public relations for MyFico.com:
"The first thing to note is that most lenders do not report missed payments until the account is 30+ days past due. Suppose a given credit card payment is due on May 15th (and) the payment is made on May 25th. Technically the payment is late, and fees and interest charges may apply. But in most cases, this late payment would not be reported by the creditor to the credit reporting agencies (CRAs)." - And, Steve Ely, President of eCredable.com states:
"The larger creditors (like credit card companies) usually have sophisticated analytic models working behind the scenes that take into account your history of payments. If you’ve been paying on time for a long time, they’re likely to forgive your one late payment, and let it slide."
However, it is best to not assume that any lender will look past one late payment. If you think your credit has been impacted by a missed payment, you should check your credit reports from Experian, Equifax and TransUnion.
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