Why a simple mistake can really hurt your credit
A ‘D’ on your report card. A speeding ticket. When looking at the grand scheme of things, do these things really matter that much? Maybe not. But in the short term, it’s possible that you felt the consequences of these small mistakes in the form of a below average GPA or a costlier insurance premium.
It works the same with credit. One late payment could banish points off of your credit score,regardless if you have spent the last few years paying on time.
What’s the big deal?
It still depends on the scoring model – but a late payment makes its way to your payment history, which is what really hits your credit score.
The reason why a late payment has so much impact is that it’s predictive. A late payment would mean that you could also fall behind on your other bills.
To the credit companies, a late payment could be an indication that you are in the middle of a financial crisis. There may be instances where it was an honest mistake of forgetfulness – but these all fall under the same category of sloppiness.
A sloppy person is likely to be disorganized, and as such, it could be a sign that you are likelier to miss payments. The higher the likelihood, then chances are it will happen again.
If you pay your bill over 30 days past due, it will be reported to the credit bureaus, which means that it will end up on your credit report and never leave for the next seven years.
However, do not be discouraged. It may seem like a long time, but sticking to your payment deadlines later on may overshadow the effect of one late payment.
You can also try to find ways to work around it before it even gets reported. If you have been paying on time and made a late payment by mistake but with good reason, then it is possible for you to reach out to your lender and see if you can work on an agreement that they won’t be reporting it. Try asking – it might work. But more than anything, what you need to focus on is to ensure that this single mistake doesn’t turn to a habit.