Everyone who borrows money should be aware of the fact that at some point that borrowing may go against you on your credit report if not maintained properly. One of the most common misunderstandings about your credit rating is exactly when a late payment will show up on your record.
Secondly, knowing when a late payment can potentially harm your credit rating can take a load of stress off of you in hard up times. It’s safe to say that its complicated due to the credit environment, but learning these windows of time can help you more safely borrow money when you absolutely need to.
First it’s important to know that there is no legal requirement for any lender or credit card issuer to report anything about your accounts to any of the credit bureaus. It is more requested at random voluntarily. Late payments however have more structure around them and adhere to slightly different rules. If a lender chooses to report your late payments to the credit bureaus they may not do so until a full 30 days have passed since the payment due date. There is also no systematic means to report an account that is between 1-29 days overdue. Due to the reporting system being voluntary, there are many scenarios where lenders choose not to report late payments until several months have passed.
You may have heard people saying, “one late payment cannot harm your credit rating”, or “you have to be two payments late before your score takes a hit”. Both of these statements are incorrect. One late payment can absolutely harm your credit score and quite considerably if your credit lender chooses to report the late payment. The one true statement you should remember is that “a late payment won’t show up until you’re 30 days late or more”.
Credit reporting agencies consider late payments in the following terms:
- 30-59 days late
- 60-89 days late
- 90-119 days late
- 120-149 days late
- 150-179 days late
- 180+ days
What you will notice is that there is no way to factor in a payment that is under 29 days late. Therefore there is no real reason to panic if your payments are a couple of days or even weeks late, because it won’t harm your credit rating, simply because there is no systematic way for it to be considered.
Whilst this is good in the eyes of your credit rating, this isn’t necessarily the case for your lender. In the eyes of your lender, one day late still means you’re late and they may charge you a overdue fee. If we are considering credit cards then you get charged in the form of interest on the unpaid balance. The trick is to not get to the point where you are incurring additional costs, which is why I would recommend using the following apps in a recent article posted on the Buckscoop blog.