You are usually conscientious about paying your bills by the due date, but this time, you missed a payment. Maybe you were super busy and forgot to mail a check or schedule an online payment. Perhaps you cracked a tooth and had to schedule an emergency appointment with the dentist. Or you might have lost your job and your unemployment checks don’t begin to cover your basic living expenses, let alone credit card bills.
In any event, missing a single payment, while far from ideal, does not automatically have to result in ruined credit. The key is to be proactive so that you have the best possible chance to preserve your credit.
Payment History and FICO Scores
Your credit profile consists of two factors: your credit report and your credit score. Your credit report lists each credit account that you presently have as well as former credit accounts dating back seven to ten years. Your credit score, also known as a FICO score is generated by a formula originated by the Fair Isaac Corporation. Your payment history counts as approximately 35 percent of your FICO score.
Missing one payment represents a minor blemish if your credit report otherwise reflects a substantial history of on-time payments. Likewise, if you have a strong credit profile showing consistent on-time payments, one late payment won’t have a major detrimental effect on your FICO score. This is especially true if you can attribute a missed or delayed payment to a mitigating factor such as a medical emergency, which you can explain in a supplemental statement submitted to credit reporting agencies.
Historical Versus Current Delinquency
“What have you done for me lately” is an accurate way to consider your credit profile. If you miss a single payment but never miss another payment, the detrimental effect of that missed payment will fade considerably over time.
In other words, missing a payment will ding your credit report and your credit score to a certain extent, no question. However, a missed payment within the last six months will have more of a detrimental effect on your credit report and your credit score than a missed payment five years ago, as long as your current credit report reflects on-time payments.
Late Versus Very Late
Where missed payments are concerned, there is late, and there’s very late. Make no mistake, missing a payment due date by even a single day can result in substantial late fees.
But if you make up the missed payment within 30 days after the original due date, your creditor may not report the missed payment to credit reporting agencies at all. This is the best possible scenario, because a missed payment that is not reported will not reflect on your credit report nor will it lower your credit score.
On the other hand, missed payments that linger longer than 30 days will almost certainly be reported to credit reporting agencies, and these detrimental items can remain on your credit report for as long as 7 years.
Ironically, the higher your FICO score, the more damage that late payments can do. Payments that are 30 days late may cause your FICO score to drop by 35 to 50 points. Payments that are 60 days late are even more detrimental to your credit report and FICO score — FICO score reductions of 100 points are not uncommon. Payments that are 90 days late are nearly always reported as serious delinquencies pr defaults on your credit report, and can lower your FICO score by 150 points or more.
What to Do if You Can’t Make a Payment
If you know ahead of time that you wont’ be able to make a payment, contact your creditor with a request to waive any late fees and hold off on sending an adverse update to credit reporting agencies. If you are a long-standing customer with a good payment record, the odds are decent that your request will be granted. If you can provide a reasonable assurance that you will be able to make up the missed payment within a few weeks at the most, say so.
On the other hand, if there is no realistic means for your to make up the payment quickly, simply emphasize your good payment history along with your commitment to bring your account back to a current status as quickly as possible. NEVER state that you have no money coming in or even mention the word “bankruptcy.” Your creditor may react by reducing your credit limit or cancelling your account, making a bad situation worse.
Protecting Your Credit
Because your payment history is weighted so heavily on your credit report and in calculating your FICO score, you should make every reasonable effort to remain current on your bills. This is especially true about secured debts such as your mortgage or your car note. Consider making some extra money on the side, or selling off unwanted possessions.
On the other hand, no one expects you to do without needed medication or skimp on other essentials just to pay your credit card bill. If things are really that bad, you should seriously consider obtaining the services of a nonprofit credit counseling agency, a certified public accountant or an attorney.
Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.