Modern technology has made many facets of life easier and more convenient. We have refrigerators that make grocery lists, robots that automatically vacuum the floors, and thermostats that adjust themselves. Despite all these tools, however, it can often seem as though our lives are busier than ever, and free time can feel like a limited luxury.
Indeed, many of us are left trying to fit everyday life in between the hustle of hurrying from one obligation to the next. In all the chaos, it’s little surprise that some things tend to fall between the cracks as they get bumped further and further down the to-do list.
Unfortunately, while some things can be safely postponed for a better day, other things have set-in-stone due dates that shouldn’t be overlooked — things like credit card bills. Not only do late credit card payments usually mean costly late fees, but delinquent debt payments can have far-reaching effects on your credit profile that last for years.
Not All Late Payments Make it to Your Credit Reports
On the bright side, simply missing your due date by a day or two isn’t the end of the world (at least, not as far as your credit is concerned). That’s because not every late payment automatically makes it all the way to your credit reports; no, you have to be really late for a payment to be reported as delinquent to the credit bureaus.
In actuality, your debt payment needs to be at least 30 days past the due date before a creditor can report the account as delinquent to the credit bureaus. So, technically, you have to actually miss a payment entirely for it to hit your credit reports as delinquent.
That’s not to say you can make late payments with impunity as long as you pay within 30 days of your due date. Your creditor will still probably charge you a late fee for a payment that’s made even one day late, however, and you may lose out on any promotional financing you’re enjoying.
You can also wind up paying interest you wouldn’t otherwise need to pay. Basically, most credit cards won’t charge you interest on purchases if you pay your full balance by your due date. If your payment is late, however, the grace period no longer applies, meaning you’ll be charged interest on your balance even if you pay in full.
The Later the Payment, the More Damage It Does
Once you are more than 30 days late, your account will be reported as delinquent to the credit bureaus. This will cause an immediate decrease in your credit scores, likely by several dozen points, and the higher your credit score started, the more it will decrease due to a delinquent payment.
That’s not the end of the story, however. If you don’t make an immediate payment to bring your account current, the damage will intensify as the account becomes increasingly delinquent. By day 60, not only will the damage to your credit increase but so, too, may your interest rate — permanently.
Many credit cards have what’s known as a penalty rate, which is a higher purchase APR that goes into effect when you miss two or more payments. While some cards allow you to go back to the normal purchase APR after six to 12 months of on-time payments, others will leave the penalty APR in effect for the life of your account.
At this point, each additional 30 days your payment is delinquent, the worse the credit damage becomes. By the time you are 180 days late (150 days for some types of accounts), the creditor can charge off your account and consider you to be in default. Other than bankruptcy, a defaulted account is about the worst possible thing your credit can experience.
Late Payments Can Stick Around for Up to 7 Years
As you can see, the amount of damage caused by a late payment will depend entirely on exactly how late that payment becomes. If you get your account back in good standing within 30 days, the worst thing you’ll likely experience is a late payment or perhaps the end of your promotional financing.
After the 30-day mark, it all goes downhill. The credit bureaus are now likely involved, which means credit score damage that can last years. Up to seven years from the date of delinquency, in fact, as that’s how long most negative items can stay on your credit reports. That means seven years of other creditors seeing your delinquency every time they pull your credit in response to an application.
That being said, the damage to your credit score may not last the full seven years. Credit scoring models are designed to give more weight to your recent credit history, which means a late payment will lose potency as it ages. Provided you get your account in order quickly and maintain a positive payment history, a single delinquent payment will likely lose most of its credit score impact after just a few years.