Missing Payment Can Penalize Scores for 7 Years
June 26th, 2008 by Kenneth Long
If you have ever missed a payment on a credit card or loan account, you may think that the late fee is the big penalty. While these fees can be hefty, they are a drop in the bucket compared to what they can cost you on future loans due to a lower credit score.
It Takes 7 Years for an Account to Revert to Positive Status
Suppose you have had a perfect payment history on your credit card account for 3 years. One month you failed to make the minimum payment and your credit card company reported a 30-day delinquency to the credit bureaus.
That late payment will plague you for 7 years. It will show on your credit report and your scores will be impacted.
I know this because I experienced a similar situation years ago during my college years. What I expected was that as the delinquency was further in the past, that the effects would be minimal as the account was closer to reverting to a positive status. While this is true, I discovered that my credit scores rose substantially when the late payment dropped from my credit history.
What this means is that small blemishes still haunt your credit report even years after the infraction. The penalty can last for up to 7 years. At that point, if there were no further infractions, the account reverts to a positive status.
FICO 08 changes mean that small infractions, such as a 30-day delinquency will stjill continue to haunt you for 7 years, but that the damage will be less. This indicates an understanding that many minor infractions are due to an oversight, rather than an inability to pay.
You Can Ask for Forgiveness
The best option if you are faced with a skipped payment is to contact the creditor immediately and request that they forgive the late payment. Most major credit card issuers are willing to forgive one late payment each year as long as your other payments were received on-time. They do this as a courtesy to their good customers.
Sure it helps to reverse that $39 late fee. However, the real savings is made by keeping that late payment off of your credit report!
This entry was posted on Thursday, June 26th, 2008 at 4:17 pm and is filed under Credit Cards, Credit Scores. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
