How Missed Payments Can Negatively Impact Your Financial Health
How do missed payments affect your financial health? Missed payments can negatively impact your financial health by lowering your credit score, triggering late fees, increasing borrowing costs, and remaining on your credit report for up to seven years. Because payment history is one of the most important factors in credit scoring, making payments on time is essential for maintaining strong financial health and long-term financial confidence.
We’ve all been there — life gets hectic, bills pile up, and before you know it, you’ve missed a payment. While it might seem like a small slip-up, missing a payment can have significant consequences on your credit score.
That negative impact on your credit of a single missed payment can take months to finally fall away. Multiple missed payments, however, can leave a stain on your credit that takes years to wipe away.
Let’s break down how missed payments happen and what you can do to avoid it. We’ll also show you how AutoPayPlus can help you stay on top of your payments!
The Ripple Effect of a Missed Payment
Your credit score is essentially a report card of your financial behavior. Timely payments are a major part of that overall grade. In fact, payment history makes up 35% of your FICO score. Missing a payment is equivalent to failing an important financial test. It shows lenders that you weren’t financially responsible for paying back loans, and the credit score won’t recover until you can show that you’re able to consistently make payments again.
There are two types of impacts when it comes to missing a payment (no matter the reason):
1. Immediate Impact
Missing a payment by even one day can trigger a late fee, but the real damage starts if you’re 30 days late. At this point, creditors can report your delinquency to the credit bureaus (Experian, Equifax, and TransUnion®), and your score could drop by 60 to 110 points. That’s a big hit, and often feels devastating, especially if you had a good score to begin with.
2. Long-Term Consequences
The longer a bill goes unpaid, the worse it gets. A 60-day late payment is more damaging than a 30-day one, and so on. Plus, late payments stay on your credit report for seven years. That means one missed payment can haunt your financial record for a long time, negatively affecting your ability to get loans, rent an apartment, or even get a job.
How AutoPayPlus Can Help
Here’s the good news: you don’t have to navigate this alone. AutoPayPlus partners with TransUnion® to provide a convenient way to check your credit score and monitor your financial health. Plus, AutoPayPlus handles more than your car loan payments. Our Members are able to track and attach multiple loan types — including student loans and mortgages — to our portal. But that’s just the beginning.
AutoPayPlus can also help you stay on top of your payments with automated scheduling. Our Members often find that they’re paying down debts sooner and more reliably than ever before.
Credit Score Monitoring
By regularly checking your credit score through AutoPayPlus’s partnership with TransUnion®, you can catch any unexpected changes early. You’re getting a clear picture of your credit health in one location. This way, if a missed payment not with AutoPayPlus does slip through, you can address it before it becomes a bigger problem.
Automated Payments
The best way to avoid missed payments is to automate them. Automation allows you to “set it and forget it,” to borrow a famous infomercial phrase. With AutoPayPlus, you can schedule your payments to ensure they’re always on time. This reduces the risk of forgetting a due date amidst your busy schedule.
Steps to Recover from a Missed Payment
Already missed a payment? Don’t panic. There are steps you can take to recover:
Make the Payment ASAP
The sooner you pay, the better. If you can make the payment before it hits the 30-day mark, it might not be reported to the credit bureaus.
Communicate with Your Creditor
Sometimes, lenders are willing to work with you if you explain your situation. They might waive the late fee or not report the missed payment.
Check Your Credit Report
Use your AutoPayPlus’ Member’s Portal to check your credit report and make sure the missed payment is accurately reported. If there’s an error, you can dispute it with the credit bureau.
FAQs:
Can one missed payment hurt my credit score?
Yes. A payment that becomes 30 days past due may be reported to the credit bureaus and could negatively impact your credit score.
How long do missed payments stay on a credit report?
Most missed payments remain on a credit report for up to seven years, although their impact generally decreases over time.
What happens if I miss multiple payments?
Multiple missed payments may have a greater effect on your credit profile and could make it more difficult to qualify for future credit products.
Can a missed payment be removed from my credit report?
Accurately reported missed payments generally remain on a credit report. However, reporting errors may be disputed through the appropriate credit bureau.
What is the best way to avoid missed payments?
Creating a consistent payment schedule, setting reminders, and using automated payment management tools can help reduce the likelihood of missed payments.
While missing a payment can negatively impact your credit score, it’s not the end of the world. With proactive measures and tools like AutoPayPlus, you can keep your financial health in check and avoid the pitfalls of late payments. Stay informed, stay on top of your payments, and your credit score will thank you!