How Quickly Do Missed Payments Impact Your Credit?

Prices are rising. Wages are lagging behind. It's easy to see why many consumers are struggling to handle all of their monthly bills.

Unfortunately, one little slip-up can be costly: your payment history is the most important factor in almost all credit scoring models. One single late or missed payment can jeopardize years of otherwise excellent credit usage.

So if you've just discovered that the bill you thought was due tomorrow was actually due two days ago, you may be wondering "how soon is this going to hurt my credit?" 

Due Date vs. Reporting Date

If you accidentally missed a recent due date, you may be in luck (at least where your credit is concerned). That's because the date when your payment is due is not the same as the date when most creditors make their monthly report to the credit bureaus.

Here's the timeline:

1. Closing date

This is when your billing cycle ends and your monthly payment (with fees and interest) is calculated. Shortly after, you receive a bill that tells you how much to pay and when to pay it by.

2. Due date

Your monthly payments will typically be due at the same time every month. No matter how much or how little you spend, your payment (assuming you owe anything) will be due on this date. If you don't make a payment by this date, your account will likely be considered late and you may be liable for a late fee.

Some creditors, however, do offer a grace period, which is a predetermine amount of time past your due date when payments can still be made with no negative repercussions. Any grace period will be spelled out in your agreement with the creditor.

3. Reporting date

Lenders and creditors report to credit bureaus voluntarily. It's not a requirement, but it is something that's in their own best interests because that information makes it easier to make future credit decisions about individual consumers.

As such, creditors will have their own guidelines for when and how often the provide updates about their borrowers to the credit bureaus (if they do at all). Generally, most major creditors will provide an account status update on all of their borrowers once a month at the same time each month. This is the reporting date, and until this report is made, the credit bureaus have no way to know that your account is past due.

For many creditors, the reporting date on client accounts is at least 30 days after the due date. This means that it's possible to miss a payment, but bring an account current before that missed payment is considered past due on your credit report.

30 Days Late

The trouble really starts once you're 30 days late. This is essentially where you've missed your due date and you haven't made up the payment by the reporting date.

Now your creditor will likely report that your account is 30 days past due. Unfortunately, even just one missed payment can put a big dent in your credit score. 

To offset the damage to your credit, make up the payment as soon as possible. If it was a one time mistake, you can try asking the creditor to remove the negative mark (make sure you're back in good standing first). 

Assuming the mark isn't removed, it will stick around on your credit report for seven years. Fortunately, as time goes back, the negative impact will lessen and you can once again improve your credit with good credit usage.

60-90 Days Late

If you don't get caught up and in fact continue missing payments your account will become even more delinquent. An account being 60 days late is worse for your credit than 30 days late. And 90 days late is, unsurprisingly, worse than that.

The later your account becomes, the bigger the impact to your credit and the more serious the potential consequences. Expect collection activity to increase with the possibility of legal action being threatened. 

If you continue to not make payments, your account eventually be charged off and/or sold to a third party debt collection agency.

Keep in mind that if you don't make up a missed payment, but do make future payments, your account will likely be reported as 30 days past due every month until you address the missed payment.

So, in summary, if you recently missed a payment there may be no avoiding a late fee, but there is a good chance you can still save your credit. Make any missed payments as soon as possible and communicate with creditors if the missed payment was a one-time mistake.

If you're worried about missed payments you may benefit from working with a debt and budgeting expert. MMI's certified financial counselors are available 24/7, online and over the phone. Best of all counseling is free.