The Affect Of Late Payments On Your Credit Score

Posted by : Frank Mignosi

late-payment-past-due-stampYou try hard day in and day out to attain a high level of credit worthiness. You make your monthly payments on-time like clockwork, but then you come to a fork in the road. Maybe business is slow this time of the year or maybe its a holiday season and you had to budget in a few gifts.

Regardless of the situation, you wind up making your payment more than 30 days late. Most consumers are under the impression that late payments only have a temporary effect on their credit score, which is a common misconception. The most common belief is that “yes it will initially have a negative impact on my credit score, but once I catch back up it will go away”

How do late payments affect my credit score?

When applying for credit a lender will review your credit worthiness and assess your credit risk. Though you may think a few late payments have little to no effect on your credit if you are currently up to date on your loan, you are mistaken. Making your payments on-time EVERY month is important. It shows lending institutions you are a trust worthy borrower. When a lender reviews your credit history and see’s late payments it sets off a red flag, warning them of the risk that comes with lending you money.

Issue’s that can occur with late payments:

  • Late Fee’s- The fee’s can range from $25-$45 depending on the lender. This can damage you more if you are only making the minimum payments to stay afloat. Your late fee may be just as much as your minimum payment was.
  • Decrease of Credit Score- As stated throughout this article late payments do have a negative impact on your credit and can result in higher interest rates as well as denial of credit in the future.

Be sure to stay true to your budget and goals. My recommendation is to put your budget together every month before the new month begins. Outline your paycheck date/amount and what bills need to be paid within that pay period.

If you have any questions in regards to late payment’s showing up on your credit report, feel free to contact one of our Mortgage & Credit Specialists at Cake Credit for a free consultation. Call directly at (813) 262-9698.