When calculating your credit score, the credit bureaus give a lot of weight to your payment history; about 35% of your score is based upon your history of timely payments on your account. But before you panic over that time you paid your bill a couple of days late, relax – the credit bureaus don’t treat all late payments the same way. Some payments are later than others.
For example, if you go away on vacation, come back, and realize that your credit card bill was due on the 15th and not the 17th, you might incur a late fee (and even an interest rate hike) if your payment is a couple of days late. But that payment will still be reported as “on time” to the credit bureaus. It is only when a payment is thirty or sixty days late that it will “ding” your credit rating. This effect will be felt most severely in the month that the late payment occurred, and over the next six months or so, your score will go back up again as long as you don’t have another late payment.
If, however, you have a 90 day late payment, this will be very harmful to your credit score. A 90 day late payment will remain on your record for up to 24 months. While 30 and 60 day late payments diminish your credit score more in the month or months that they occur, as long as they’re isolated incidents, they don’t have a long-term effect. A 90 day delay, on the other hand, raises the red flag for creditors and stays on your record much longer. Some experts say that a single 90 day late payment can be as damaging to your file as a bankruptcy, tax lien, or collection. By the time you go to 120 days past due, your debt may be headed to collections or write-offs, and even more damage to your credit report.
It doesn’t matter if it was a $50 bill or a $5000 bill – late payments can haunt you for a long time. Be sure to stay on top of those due dates, and your credit history will show the results over time.