One of the biggest fears people have when it comes to their credit card is missing a monthly credit card payment. We may all have the best intentions but we also know that sometimes life gets in the way and unexpected expenses come up.
So how does a missed credit card payment really affect your credit history and your credit score? The truth is one missed payment isn’t the end of the world, but it can be.
If you make a payment in less than 30 days
Sometimes we don’t even realize our credit card payment date has come and gone. With busy schedules, classes to attend, and group work to organize, sometimes our credit card can be the last thing on our mind.
When you remember, make a payment as soon as possible and contact your bank right away. They’ll most likely ask for confirmation that the payment has been made such as an online banking transaction confirmation or the transaction receipt number from the ATM.
If the payment is 30 days late
Banks and credit card companies report consumer history to credit bureaus (Equifax, TransUnion, and Experion) on an ongoing basis. If your payment is made within 30 days of the payment date the odds are you’re OK. However once your credit card payments are more than 30 days late your bank or credit card company will report it and it has a negative effect on your credit score.
When a bank is looking at your credit history to determine if you’re credit worthy, aka if they should lend you money, one late payment may not be such a big deal. However repeated missed and late payments will be a problem.
If the payment is 60 days late
This is where your credit history starts to go downhill. Every payment you make is given a ranking – R1 is the best and means you paid on time, R9 means your credit has been written off.
Late payments can have a long lasting effect on your credit history and can hurt you down the road when you want to apply for other credit products such as a mortgage or car loan. According to Equifax, “Late payments stay on your credit report for approximately seven years.”
Positive information stays on your credit history a lot longer. “In general, credit accounts that you have paid as agreed will stay on your credit report for up to 10 years,” says Equifax.
If the payment is more than 90 days late
If your credit card payments are more than 90 days late the odds are you’re having some financial troubles. My advice is to contact your bank or credit card company as soon as possible to make payment arrangements. Explain to them what’s going on and hopefully they can offer a solution.
Some banks offer interest-only repayment plans for financial hardship which allows borrowers to make interest-only payments. Although the balance isn’t getting paid off at least it’s keeping your account (and credit history) in good standing.