Missing one bill payment might not seem like a big deal. That is until that payment blemish causes a lender to rethink your loan’s terms—or even your overall eligibility.
Being a forgetful bill payer is a big deal to lenders and credit bureaus. And if you continually skip payments, you can seriously bruise your financial future.
Your credit score
How you’ve paid your bills in the past accounts for 35% of your FICO credit score. Typically, creditors don’t report a payment as late until you’re 30 or more days past due. However, some lenders report earlier—as soon as one day past the deadline. Even one missed payment can have a negative effect on your credit score.
If you’re late with more than one creditor or your bills are not paid for more than a month, your credit will take a serious hit. Multiple late payments will be reported multiple times, while severely late payments—60 days or more—count more heavily than payments made within 30 days of the due date.
Late payments will remain on your credit history for seven years.
Typically, accounts are sent to collections if they’re unpaid for 90 days or longer—though some creditors may turn accounts over sooner or later. When this happens, the original creditor actually sells the debt to a collection agency, which in turn tries to collect from you. When your account is turned over, the original account will be reported as “charged off/unpaid.” You’ll also get a second serious black mark on your credit history when the collection agency files a report about the debt. These reports will stay on your credit history for seven years.
Applying for a mortgage
If you’re applying for a mortgage, having late payments and collection accounts could be harmful. Mortgage lenders look more closely at your credit history than other lenders (a process known as underwriting). With a history of late payments, you likely won’t qualify for a lender’s best rates or terms. Unpaid collection accounts may cause your application to be denied altogether.
Improving your score
If you have only one late payment, talk to your creditor. Many creditors are willing to forgo reporting a single late payment, or remove the report, if you have a history of paying on time.
If you’ve missed more than one payment, time and determination are you best tools for improving your credit score. Making a late payment or having an account sent to collections will have the greatest impact on your credit score as soon as it is reported. As time passes, the impact on your credit score will lessen.
Meanwhile, keep building up positive history by paying every bill on time, which will help counteract past problems and improve your credit score.
Always ahead of the highly competitive RGV real estate market, Marilyn Cortez is a Spanish speaking native of the Rio Grande Valley. Born and raised in Mission, Marilyn is committed to her clients, and is recognized as a Top Agent in the Greater McAllen Real Estate area, and within Keller Williams Realty. Since the start of her Real Estate career in 2007, she has sold over 40 million dollars of real estate. Known by her fellow real estate agents to be hardworking, honest, dedicated and motivated, Marilyn is knowledgeable in all areas of Real Estate and has built her business on results, with more than 70% of her clients being repeat clients.
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"Marilyn helped us buy our first home, and we never felt like we were out of the loop. I was always informed about every single step of the process, and if I had any questions or concerns, Marilyn answered all my questions in a timely manner. I highly recommend her as an Agent, and I can't wait to do business with her again."