How much does one late payment impact my credit?

If you’re worried about how one late payment may affect your credit score, chances are you’re pretty careful about paying your bills on time. But mistakes happen - any of us can forget to pay a bill, face an unexpected financial setback or move to a new place and not realize there was a final utility bill due, for example.

While a couple of days won’t necessarily have any effect, over time, the impact of a missed payment will unfortunately start taking its toll. Because payment history is the largest determining factor of your credit score (35-percent) and creditors also check your history to evaluate your creditworthiness, being late paying your bills can add up to significant credit challenges for you if you’re not careful.

Here are 3 key ways late payments can impact your credit situation:

One late payment = decrease in credit score

At 30 days or more of a missed payment, the credit bureaus (Equifax, TransUnion and Experian) are likely notified and the late payment shows up on your credit report. And the impact is significant: Equifax reports per FICO data, that can add up to as much as a 90- to 110-point drop on a FICO Score of 780 - even if it is the first time that consumer has ever missed a payment on any credit account.

The longer the bill goes unpaid, the more significant the impact

Once you go beyond 30 days to 60, 90 and beyond, the negative effect on your credit score grows. At 150 days, the late payment becomes a “charge off,” which means the creditor writes off that payment as uncollectible - although in some cases that account may go to collections.  This kind of black mark on your credit history not only drags down your score, but also makes it much harder for you to qualify for loans or credit cards.

A missed payment affects your credit history & financial outlook for years to come

It’s true: even one missed payment will remain on your credit report for up to seven years. Your resulting lower credit score means that you may not quality for loans or new credit cards, or if you do, you’ll be considered a “high-risk borrower.” That means you’ll have to deal with higher interest rates and fees.

How to get back on track

The most basic way is to pay the debt as soon as possible, even if it is a little at a time by making a minimum payment on a credit card, or working out a payment plan with the creditor. Pay as much as you can afford - that sends a strong sign to future creditors that you’re doing your best.

Once you’ve paid off the debt, you can write to the company you owe money and ask for a “goodwill deletion.” Send a letter explaining your situation, reminding the creditor of your previously stellar track record, and ask politely that they remove the late payment from your credit report. There’s no guarantee that they’ll comply, but the benefits of eliminating negative information from your credit report significantly outweighs not taking action.

One late payment isn’t the end of the world, but don’t let things snowball. Clear up your debts, and get back in the habit of paying your bills on time. Consistent on-time payments top the list of an easy and effective way to keep your credit score healthy.