How Far Back Do Lenders Look at Late Payments?

Late payments influence an individual’s financial standing, reflecting their ability to manage financial obligations. Lenders consider payment behavior when assessing creditworthiness.

Late Payments and Credit Reports

A payment is considered late for credit reporting purposes once it is at least 30 days past its due date. Creditors do not report a payment as late to Equifax, Experian, and TransUnion if it is only a few days or even a couple of weeks overdue. If a payment remains unpaid for 30 days or more, the creditor then reports it to the credit bureaus, marking it as 30, 60, 90, or even 120 days late, depending on how far behind the payment falls.

Once reported, a late payment remains on an individual’s credit report for up to seven years from the original delinquency date, which is the date the payment first went past due and was not subsequently brought current. This applies even if the account is later brought up to date or closed. Equifax, Experian, and TransUnion collect and maintain this payment history, which forms the basis of an individual’s credit report.

How Late Payments Affect Credit Scores

Payment history holds the most weight in credit scoring models, accounting for approximately 35% of a FICO Score and up to 41% of a VantageScore. A single late payment can cause a drop in a credit score, with the impact often more severe for individuals who previously maintained excellent credit. The extent of the score reduction depends on several factors, including the severity of the lateness and the recency of the event.

A payment that is 30 days late has a negative effect, but the impact intensifies as the delinquency period lengthens to 60, 90, or more days. More recent late payments affect a score more profoundly than older ones, as scoring models emphasize current financial behavior. A pattern of multiple late payments or a progression to more severe delinquencies, such as an account being sent to collections, further diminish a credit score and signal increased risk to lenders.

Lender Evaluation of Payment History

While a late payment can remain on a credit report for up to seven years, lenders focus their evaluation on a more recent timeframe. Many lenders, particularly for loans like mortgages, place greater emphasis on the most recent one to two years of payment history. This shorter look-back period reflects a desire to assess an applicant’s current financial habits and stability.

Different types of lenders may apply varying criteria when reviewing payment history. Mortgage lenders have strict requirements regarding recent payment behavior; a single recent late payment can impact approval or interest rates. Auto lenders and credit card issuers may also consider recent late payments, but their specific thresholds for approval or terms can differ based on their risk appetite and the type of credit being extended.

Automated underwriting systems, used by lenders, often apply rigid criteria, potentially leading to automatic denials if recent late payments exceed set limits. In some cases, though less common for severe or very recent issues, a loan officer might manually review an application. This allows for consideration of explanatory factors for past late payments, but it requires a strong overall financial profile to justify an exception.