Can Missing One Credit Card Payment Affect Your Credit?
, by Rob Kaufman
The holidays are right around the corner. That typically means that the credit card(s) will be coming out in full force. It also means that the credit card bills will start appearing about a month later. Will you have enough money to pay down those bills in full... or at least pay the minimum amount due?
If the answer is "no" or you're not sure, you might want to reconsider your gift-giving this year - or at least your gift-giving budget. That's because missing the due date on a credit card just one time can cause a variety of problems.
Potential effects of missing one credit card payment.
There are a number of consequences if you don't pay your credit card bill on time. Some of them include:
A Late Fee that will show up on your next billing statement. Depending on your credit card issuer's policy, the amount of this fee can range from $10 to $35. It will continue to be charged each month the payment is late or the minimum amount due is not paid.
An Increase in Your Interest Rate if your late payment is 60 days past due. This rate can rise to 29.99% or whatever rate your issuer states in their terms and conditions. This higher rate increases the interest you have to pay which may extend the amount of time it takes to pay off the balance.
The two consequences above are the immediate "financial" ramifications of missing one payment. There are two additional effects that are longer lasting and can affect you financially.
A Credit Report Notification from the issuer to the three credit reporting agencies. This means your credit card company will notify Equifax and/or Experian and/or TransUnion about the late payment. Unfortunately, this late payment can last on your credit report for up to seven years.
A Drop in Your FICO® Score since 35% of your credit score is based on your Payment History. The lower your credit score, the more difficult it is to get credit. Even if your application for credit is approved with a lower score, you can get higher interest rates on that loan/credit card.
What to do if you've missed a payment.
Although the effects of a missed payment sound ominous, there are things you can do to possibly avoid some of them, or at least start to remedy the situation.
- Late fee request removal. Think about contacting your bank and requesting them to remove the late fee. If you're currently in good standing with them, they might understand and be forgiving.
- Pay on time. If your rate increased due to a missed payment, issuers are required to reset your interest rate back to the pre-penalty rate after you make six months of on-time payments. So pay on time and keep track of when those on-time payments started. Paying on time will also help raise your credit score.
- Create a budget. Set up a budget so that you'll have enough money to pay your credit card bill (even if it's just the minimum payment - until you can pay it off in full). Having a budget can also help you pay your other accounts on time.
- Consider automatic payments. Setting up automatic payments or electronic reminders (i.e., emails and texts) help you pay bills that might otherwise have slipped your mind.
- Monitor your credit. By keeping an eye on your credit, you can keep track of your payment history and ensure that late payments are taken off your credit report after the appropriate amount of time.
There have been many myFICO customers who have missed a payment (or two) by mistake. If you do a search at the myFICO forum you can find out how some have handled the situation and made things better for themselves and their credit.