Late Payments and Credit

Making your credit card payments on time is extremely important to your credit score. Late payment fees and higher interest rates are undesired results of late credit card payments.  

What does a late payment really do to your score? Credit score calculation doesn't treat all late payments the same. While thirty and sixty day late payments affect your credit score more in the months they occur, their effects diminish over time as long as they’re isolated incidents. A ninety-day late payment, on the other hand, is more harmful to your credit score, especially if it occurred within the past 24 months.

Whether it is a 30, 60, or 90 day late payment, the results are detrimental to your credit score, so you don’t want to drop the ball and miss a payment.  How your creditors respond to late payments can continue to affect you for months, and even years, to come. 

Five Things Happen When You Pay Late

1.       Your creditor will charge a late fee. Your next billing statement will include a fee for the late/missed payments. Late fees typically range from $35 to $50. You'll receive a late fee each month your payment is late.

2.       Your interest rate will increase. Creditors don’t just penalize you with a fee, they’ll often increase your interest rate to the default rate. The higher interest rate increases your finance charges making it more expensive to carry a balance.

3.       Other credit card interest rates might increase. If any of your other creditors include a universal default clause in your card agreement, you’ll see those interest rates rise as well.

4.       The credit bureaus are notified when your payment is more than 30-days late.  An entry is added to your credit report and will stay for seven years.

5.       Your credit score will drop. Remember, your payment history makes up 35% of your credit score. Late payments can have a significant effect on your score affecting your ability to get new credit in the future!

Defensive Tip: Set up auto-pay on your all your credit cards to make the minimum payments. This will ensure that at least your minimum payment is made on time, regardless of how hectic things can get! This is what we call strategic planning.

Expert Credit Consultants, LLC specializes in establishing business credit and funding using the exclusive Business Credit and Finance Suite as well as credit restoration and optimization. www.ExpertCreditConsultants.com.