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Man looking at his laptop to find out how a missed credit card payment will impact his credit score

The Impacts of a Late Payment on Your Credit Score

Making on-time payments is essential to having a good credit score. On-time payments make up 35% of your credit score. Therefore, missing a payment harms your credit score. Staying on top of your payments is vital to keeping your score healthy. It’s time to explore the impact of missing a payment on your credit score. 

Key Takeaways:

  • When your credit card is late, you may face monetary penalties. 

  • Higher interest rates could be applied to your card if you are late.

  • Your credit score will go down if your payments are consistently late.

  • You can take actions like automating your payments to prevent missing a payment.

What Happens If Your Payment is Late

The consequences of making a late payment vary. It depends on how many days late your payment is.  Most credit card payments are considered late 30 days after the due date. 

For example, if your payment was due more than 30 days ago and you haven’t yet made a payment, you are considered late. Your score drops even further for an account over 60 days late. 

Finally, some companies will consider your account delinquent if you are past 90 days. There are actions that card companies will enact if you are late on your payments.

Late Fees and Penalties

The immediate consequence of missing a credit card payment is the imposition of late fees. These fees can vary but typically add an extra financial burden. You could be charged anywhere from $25 to $35. If you keep missing your payments, the fees will continue to be added.

Increased Interest Rates

In addition to late fees, missing a credit card payment usually results in the accrual of interest charges on the unpaid balance. Over time, the compounding effect of these charges can significantly increase the overall cost of your outstanding balance. 

Moreover, your interest rate may go up. Your 18% interest rate could increase to 24%. It will keep you from paying off your credit card debt sooner.

Losing Promos and Bonuses

Credit card companies often offer promotional rates or benefits to attract customers. Missing a payment may result in losing these perks, potentially leading to higher interest rates or eliminating rewards and bonuses.

You Become A High Risk Borrower

Repeatedly missing credit card payments can strain your relationship with creditors. They may view you as a higher-risk borrower, making it more challenging to negotiate favorable terms or secure loans in the future.

Couple looking at budget

How Late Payments Affect Your Credit Score

As previously mentioned, payment history is a major factor in your credit score. Your score will not be affected if you pay your bill within 30 days. 

Missing credit card payments will cause a huge drop in your score if you don’t make it in time. Your score could drop by as many as 100 points. If you go past the 30 days, the score is in danger of dropping more.

It will take some time to recover your credit score if that happens. If your payments are over 60 days late, your credit card company may send your bill to collections. Your score will continue to drop, hurting your chances of getting loans or other financial transactions later.

A missed credit card payment can appear on your credit report for seven years. If you start paying on time and catch up, it will still stay on your report. Therefore, it is essential to stay on top of your payments.

How to Prevent Late Payments

You can use some strategies to prevent missing a payment and harming your credit score. These are easy to implement and will help to prevent further missed payments.

  1. Automate Payments

Setting your bills to pay automatically each month saves you a headache. Most credit card issuers offer this option, allowing you to schedule payments for the minimum amount due or the full balance each month. Automating your payments eliminates the risk of forgetfulness or busy schedules interfering with your financial obligations.

  1. Set Reminders

Setting a reminder to pay your credit cards is easier than ever. You can use your phone or computer to set up payment notifications. Or, you could use the traditional approach and write the dates down on a calendar. Use whatever method works best for you.

  1. Utilize Mobile Apps

Use the numerous personal finance apps to help you manage your credit card payments. Many banking apps allow you to set up alerts for upcoming due dates and even provide insights into your spending habits.

  1. Change Your Due Dates

You can adjust the date if your paycheck doesn’t align with your credit card due date.  Aligning your due date with your payday can make it easier to ensure funds are available when your payment is due. Many credit companies are flexible on due dates if you pay on time.

Preventing missed credit card payments requires proactive planning, organization, and available tools and resources. Adopting these strategies into your financial routine can safeguard your credit score, avoid unnecessary fees, and keep your finances looking healthy.

To Sum Up

The impact of late credit card payments on your financial health can be significant and multifaceted. Beyond the immediate financial penalties, late payments can result in increased interest rates, a negative impact on credit scores, and potential hurdles in obtaining future credit. To avoid these consequences, it is crucial to cultivate responsible financial habits. Setting up automatic payments, creating reminders, and using apps can ensure timely credit card payments.

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