Missing a monthly bill payment carries consequences more severe than late fees and embarrassment. Late payments can cause long-term damage to your credit score and affect your ability to qualify for loans and other financial products. You should always try to make your payments in full and on time to avoid these consequences, as your credit is on the line.

Here’s how a late payment can affect your credit:

1. Late Payments Appear on Your Credit Report

Once your payment is at least 30 days late, the company can report the missed payment to the credit bureaus. When this happens, the late payment appears on your credit report and is calculated into your credit score. Late payments show up on your credit report along with how late they are. They can be a warning sign to potential creditors that you have trouble making your payments on time.

That doesn’t mean you should give up on making a payment once it’s landed on your credit report. If you make up for a missed payment quickly, you may be able to avoid further damage to your credit score.

2. Late Payments Lower Your Credit Score

One late payment can negatively affect your score significantly, especially if you previously had strong credit with no history of late payments. The actual effect on your credit score depends on several factors including your current credit score, the number of late payments you already have, and how late the payment is.

  • A 30-day-late payment can land on your credit report and cause your credit score to drop, though the long-term damage may be minimal.
  • A 60-day-late payment can cause your credit score to drop further, though your score will recover over time.
  • A 90-day-late payment can cause significant damage to your credit score for up to seven years.
  • A 120-day-late payment can be “charged off” (essentially, wrote off as a loss) and sold to debt collection agencies, which will cause further damage to your credit score.

It’s important to remember that late payments will only stay on your credit report for seven years, though it’s in your best interest to pay off a debt before it goes into collections.

3. Late Payments Can Go into Collections

Once a debt is significantly late, the company may sell the debt to a debt collection agency. This is reported as an account in collections on your credit report and will damage your credit score even further for up to seven years.

Accounts in collection can be more damaging to your credit than late payments, so you should try to settle your debts before they go into collections.

In Closing

A late payment can affect your credit score for up to seven years – the later the payment is, the more damage it can cause. While the damage of a late payment can lessen over the years, you should try to settle a late payment before it becomes severely past due or goes into collections. You’ll need to wait up to seven years from the time the payment lands on your credit report to see it disappear.