Late Payments and Your Credit: The Facts You Need to Know

late payment

No matter how careful we are, no matter how diligently we plan, and no matter how responsible we are, at some point we will all make a mistake. We can hope it’s not a financial mistake, but it happens. I remember a time many years ago when I used to mail all our monthly expenses before online bill payments were so easy and convenient. I would write out the checks as they showed up in the mail and mail everything the following day. Once after our first daughter was born I opened up the console in my car – a console I never use since I’m too much of a neat freak to leave clutter in the car – and found an envelope made out to my mortgage company.

Panic set in. The mortgage is due the first of the month. I’d written that check weeks before, and here it was the 11th of the month and I hadn’t mailed it. I was ready to cry remembering a few weeks before when I’d gone into labor in the middle of the night and the envelope had been sitting on top of the console for me to stick in the mailbox the following morning when I was out running errands. My husband was driving me in my car to the hospital and I remember him sticking the envelope in the console as we got into the car; I’d forgotten.

I was certain our credit was ruined, our lives were over and all the bad things would happen any moment. It turns out, I had nothing to worry about. Nothing happened; I called the mortgage company to beg them to please not punish me, to please listen as I explained what happened and to please take a payment over the phone. The woman I spoke with was so kind. She listened, congratulated me and said that it wasn’t even late until the 15th and that she would be happy to take a payment over the phone. I had nothing to worry about.

The truth is that we often don’t have anything to worry about when it comes to making an accidental late payment, but it does help to get to know the rules. For instance, your mortgage might not technically be late for two weeks following the due date since your mortgage company knows you have to get your pay periods in order and your bills paid. They won’t even report a late payment until it’s 30 days late. What else do you need to know? I have it here for you.

Late Payments Are Not Good

It’s not a good idea to get comfortable with the idea of making a late payment of any kind, particularly when it comes to a credit card. While your mortgage company and any bank with a car loan issued to you provides a grace period of anywhere from 10 days to two weeks, most credit card companies do not. Do not make late payments if you want to keep your credit in check.

Interest Rates Increase

With creditors, it’s different each time you do something wrong or late. For instance, one creditor might not worry so much if you make a payment two days late, but another might go ahead and charge you a higher interest rate if you are only one day late. You don’t want that at all, so be on time.

Late Fees

If you make a late payment, you will pay a late fee. Credit card companies are not like your mortgage company; there is no grace period. You need to make the payment by the time and date specified in your contractual agreement or you will incur a late fee that might be anywhere from $15 to $35.

Credit Reporting

The good news is that even if you do make a late payment by accident, you won’t be reported to the credit bureau until your payment is 30 days or more late. You have time before it really has an effect on your credit, but you will still pay late fees and other penalties you might otherwise want to avoid.

What Can You Do?

Aside from setting reminders and making automatic payments, you might want to note that you can often do something about late payments if you put forth the effort. Do you have an outstanding credit history and track record with the company in question? If so, call them and explain that it was a mistake on your behalf and ask if there is anything they can do to erase the late payment from your report or record. Oftentimes, creditors are happy to do that with their best customers.

Another route you can take is the preemptive route. Was there some sort of financial emergency in your family that means you will not be able to make a payment on time? Call the company in advance – before your payment is late – and explain the situation. Oftentimes they will be willing to work with you to rearrange your payments and make a payment plan of some sort so that you can avoid late fees and being reported as late.

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