Your payment history is the single most important factor that makes up your credit score. Your ability to manage your credit responsibly is demonstrated when you pay all your bills on time, which builds your credit report. If you make late payments on your credit report, your credit score can be significantly lowered and you appear to have difficulty managing your finances.
Regarding late payments and your credit, here are four myths you can’t afford to believe.
Myth #1: Late payments affect your credit the day they become past due.
The reality: Generally, late payments don’t appear on your credit report until they are at least 30 days past due. If your bill is less than 30 days late, you can pay it now to protect your credit score. Other penalties, such as late fees, may still apply.
Myth #2: Once a late payment shows up on your credit report, it’s too late to reverse it.
The reality: After a bill is 30 days past due, it will appear on your credit report as a late payment. The account may show up in collections when the late payment is 60 days, 90 days, and 120 days late. Whenever it gets updated, it can further damage your credit score. In this case, even if your bill is already late, you should pay it off as soon as possible to avoid further consequences.
Myth #3: Late payments affect you for life.
The reality: Late payments gradually affect your credit score, and your credit can recover as long as other negative items, such as additional late payments or accounts in collections, aren’t added to your credit report. The late fee can be removed from your credit report after seven years and will no longer affect you.
Myth #4: A single late payment doesn’t matter.
The reality: A single late payment can have a significant impact on your credit score, depending on the state of your credit. Having poor credit and/or a history of past due bills may not be so significant if you already have poor credit. If you have good credit, you could see a steep drop in your credit score after a single late payment.
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