When Does a Late Payment Affect Credit?

Credit scores play a significant role in an individual’s financial life, influencing access to loans, credit cards, and even housing or insurance rates. Payment history stands out as a particularly influential component among the factors that shape these scores. Understanding how late payments are recorded and affect one’s credit profile is important for maintaining financial health.

Defining a Late Payment for Credit Reporting

A payment is considered late as soon as it is not received by its designated due date. For a late payment to be formally reported to the major credit bureaus—Experian, Equifax, and TransUnion—a specific delay threshold must be met. Creditors do not report a payment as late until it is at least 30 days past the original due date. This 30-day window provides a grace period during which a payment can be made without it appearing as a negative mark on a credit report.

Even if a payment is only a few days overdue, it can still incur late fees and potentially lead to the loss of certain account benefits. If only a partial payment is made, it will be reported as a late payment, even if submitted before the 30-day mark.

The Reporting Process

Creditors transmit account information to the three major credit bureaus on a regular basis, once a month. The specific day of the month for these updates can vary by lender and even by account, meaning that a credit report can change frequently as new information is processed. When a payment moves beyond the 30-day mark past its due date, creditors report this delinquency to the credit bureaus.

The severity of the late payment is categorized and reported based on how many days past due the payment is. Common reporting intervals include 30, 60, 90, 120, 150, or 180 or more days late. For example, if a payment due on January 1st is not made by January 31st, it can be reported as a 30-day late payment. If it remains unpaid by March 1st, it could then be reported as a 60-day late payment, and so on. Federal student loans are an exception, as they are not reported as late until they are at least 90 days past due. If an account continues to go unpaid, it may eventually be charged off as a loss by the creditor and potentially sent to a collection agency, which would also be reported to the credit bureaus.

How Late Payments Impact Credit Scores

Payment history is a primary factor in calculating credit scores, accounting for approximately 35% of a FICO Score and up to 40% for VantageScore models. This weighting highlights the importance of making timely payments to maintain a strong credit profile. Even a single payment reported 30 days or more past its due date can significantly lower a credit score. The initial score drop can be substantial, particularly for individuals who previously held high credit scores.

The impact on the credit score increases with the degree of lateness; a 60-day late payment will cause more damage than a 30-day late payment, and a 90-day late payment will have a greater negative effect. Repeated late payments or a pattern of missed payments further exacerbates the negative impact on credit scores. While late payments can remain on a credit report for up to seven years from the date of the delinquency, their negative influence on the score tends to diminish over time, especially if subsequent payments are made on time. Different types of accounts, such as mortgages versus credit cards, might also be weighted uniquely within scoring models, though timely payments are consistently prioritized across all account types.

Checking and Correcting Credit Report Information

Consumers have the right to access their credit reports to review the information reported by creditors, including any late payment entries. Under federal law, individuals are entitled to one free credit report every 12 months from each of the three major nationwide credit reporting agencies: Equifax, Experian, and TransUnion. These reports can be obtained through the official website AnnualCreditReport.com. It is advisable to regularly check these reports for accuracy.

If an incorrect late payment entry is discovered, consumers can dispute the information with the credit bureau or directly with the creditor that reported it. The dispute process involves explaining in writing what is believed to be inaccurate and providing supporting documentation. The credit bureau is required to investigate the dispute within 30 days. If the investigation confirms an error, the credit bureau will update the report, and the creditor will be notified to correct their records. While accurate late payments cannot be removed, disputing errors helps ensure the credit report precisely reflects one’s payment history.