Defaulting on your personal or home loan EMIs can adversely affect your credit score, including steep late fees. Are you aware that past payments or payment history can affect your credit history up to the extent of 35%? Your payment, or repayment history, has the maximum impact on your credit score.
Are you wondering how long the ‘late payment’ red mark will reflect on your credit report or how it can influence your credit score? Continue reading to find out answers to both your queries.
When is Your Payment Considered Late?
You’ll be regarded as a defaulter even if you pay just one minute after the due date and time. For instance, if your due date (of payment) is on the 5th of each month, you should pay latest by midnight on the 5th day of every month. Your creditor may allow you to clear payment within the grace period, which kicks in immediately after the deadline expires.
Many creditors or lenders offer this privilege (grace period) as a last resort to enable borrowers to avoid paying late fines.
How Long Do Late Payments Stay on Your Credit Report?
The blot of late payments generally remains on your credit for precisely seven years if it is not a mistake. Ensure you tender a dispute application if you spot an error in your credit report. The exact period the late payment blotch stays on a credit report could, by and large, vary from one person to another.
Go through the FICO (Fair Isaac Corporation) report to determine how much time it’ll take for your credit score to recover from late payments.
In What Way Late Payments Affect Credit Score?
Remember that late payment does not reflect on a credit report until it is 30 days overdue. Once outstanding late payment crosses the 30 days, your credit report is dropped into one of the following buckets: –
- 30-days behind schedule
- 60-days behind schedule
- 90-days behind schedule
- 120-days behind schedule
- Written off as a loss once late payment goes beyond the 150 days
The above shows that the longer you delay payment, the greater the damage to your credit score.
How to Mitigate the Adverse Effect of Late Payments?
As per a 2020 Experian report, nearly 1.5% of all borrowers have defaulted on their due payment by 30-180 days. Get in touch with your creditor to determine if their institution is willing to consider waiving the late penalty. The creditor may not insist on the late fine provided you’ve paid your previous EMI on time.
Your sole aim would be to clear (your dues) the maximum amount possible at the earliest as far as you’re concerned.
Avoiding Late Payments
Signing up for automated payments is best to avoid defaulting on your monthly EMIs. However, doing so could risk default, especially if you receive your salary well past the due date or don’t budget routinely. You can write down the due dates in a diary or mark the dates on an almanac if registering for autopay doesn’t work.
Everything You Need to Know About Credit Repair
You resort to credit repairing, especially when your credit report is incomplete or contains erroneous data or information. Preparing a credit report takes time, so it follows that it is also time-consuming to fix or correct a faulty credit report. To improve your flawed credit report, you first have to seek a credit report from Equifax, Experian, or TransUnion.
Based on the data contained in your credit report, this information may work in your favor or work against you. You’ve to do away with the negative aspects of the credit report, whereas positive items require monitoring. However, you should refrain from trying to modify or alter the information except if the data is inaccurate.
If you face issues with your credit score or find it tough to improve it, consult an expert credit repair agency. Super Credit Repair is one such organization with a team of experts who have been helping people manage their finances and improve credit scores in Pinellas County, FL. The company would evaluate your situation and provide the best ways to improve your credit scores.
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