Managing your finances responsibly is key to maintaining a healthy credit score. But what happens if you miss a payment or pay late?
What is a late payment?
A late payment occurs when you fail to make at least the minimum required payment on a credit account, like a credit card, loan, or mortgage, by the due date. Even being a few days late can sometimes cause problems, depending on your lender’s policies.
Will a late payment impact my credit score?
Yes, late payments can affect your credit score. Usually, lenders will report missed or late payments to credit reference agencies, like Experian, Equifax or TransUnion, when a payment is 30 days overdue or more. This negative mark can lower your credit score making it harder to get loans, credit cards, or even mobile contracts in the future.
However, if you make a small error, which is quickly resolved, this may not get reported. Therefore, it may not impact your score if you correct the error fast.
How long do late payments stay on your credit report?
A late payment can stay on your credit report for up to six years from the date it was reported, even if you later pay the debt off. Over time, the impact of the late payment on your credit score may reduce, especially if you continue to make all future payments on time.
What to do if I’ve missed or made a payment late?
If you’ve missed a payment and you’re wondering what to do next, here’s some quick tips that might help you:
- Pay as soon as possible: The sooner you settle the missed payment, the better.
- Contact your lender: Many lenders offer support, such as payment holidays or adjusted repayment plans if you speak with them about the issues you’re having.
- Check your credit report: Make sure the missed payment has been recorded correctly and that no other errors exist.
- Set up reminders or direct debits: Prevent future late payments by automating your repayments through direct debits. Alternatively, set reminders up so you make sure you never miss a payment again.
Can I remove a late payment from my credit report?
In most cases, you cannot remove a genuine late payment from your credit report until the six year period ends. However, you may be able to:
- Dispute errors: If the late payment was reported incorrectly, you can contact the credit reference agency to have it corrected or removed.
- Request a goodwill adjustment: Some lenders may consider removing a late payment if you have a strong history of on-time payments and can provide a good reason for the missed payment. However, the lender does not have to do this, so it’s important not to rely on this being the case.
How can late payments impact a secured loan application?
If you’re applying for a secured loan, otherwise known as a homeowner loan or second charge mortgage, you might be worried about late payments showing on your credit report. The good news is that secured lenders often have more flexibility because your property acts as security. This means you may still be able to get approved even if you’ve had some late payments.
That said, approval depends on how frequently you’ve missed or delayed payments. Additionally, each lender has its own criteria. Therefore, some lenders may approve your application, while others might be more cautious.
Summary
In short, a late payment can hurt your credit score, but taking action quickly may help minimise the impact. However, it’s best not to rely on this and to stay on top of your payments whenever possible. Staying organised, setting reminders and speaking with your lender are the best ways to keep on top of your finances.
Loans are secured against property - Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
