How Missed Payments Impact Your Credit Score

Insights on the effect of late payments

Your ability to pay your bills on time is a huge component of your credit score. In fact, it’s the biggest. Payment history makes up 35 percent of a FICO score and 40 percent of a VantageScore, both the largest contributing factors. That means if you’re late on payments, your score will take a beating. Here’s what you need to know about how missed payments impact your credit score.

Payment Amount

Typically, the bigger the payment amount and total balance of the debt, the more a missed payment hurts your score. Bigger debts, bigger fallout.

Type of Debt Payment

The type of debt has no bearing on how much your credit score is impacted. If you miss a payment on a credit card, it’s treated the same as missing a payment on a car loan.

Duration of Late Payment

The longer you wait before making a payment, the worse it is for your credit score. Here’s a quick look:

Less than 30 days late. If you make a payment before it’s 30 days late, you’re good to go. Payments of less than 30 days late don’t impact your score.

More than 30 days late. Once you’re more than 30 days late on a payment, it is noted in your credit score and your score could go down by as much as 180 points.

More than 60 days late. If you are over 60 days late, there’s a good chance that your debt is being sold to a credit collection agency. That agency will then stop at nothing to collect the debt. It can be quite miserable.

Credit Report Impact

Late payments can stay on your credit report for up to seven years. Yes, even if you end up paying off the debt completely. That’s why it’s important to always make payments on time. If you’re struggling to pay bills, set up reminders or auto-payments. Go through your budget and trim excess expenses to make way for bill payments. Do whatever you need to, because falling behind on bills can be brutal on your credit score.

SavvyMoney/Chris O'Shea - April 2023