The best advice for making monthly payments on a loan or credit card is not to be late. Of course, life sometimes gets in the way. No one knew there’d be a global pandemic when they used that loan payment calculator to make sure the monthly payments were affordable. 2020 was a good example of “anything can happen.”

The worst of that is over, but economic circumstances continue to be challenging. For many people, late payments are a reality they need to face. It’s important to understand how being late impacts a person’s credit score and personal credit history. They might also want to review their options to ensure they don’t happen again.

The impact of missed payments on credit scores

FICO scores are calculated using several variables that measure how much of a risk a person is to lenders. One of those is called “payment history.” It’s worth 35% of the overall credit score. When a person misses a payment or makes a payment late, that portion of their score goes down and stays down for several months until they can show multiple on-time payments in a row.

In most cases, lenders report to the credit bureaus every thirty days, so a payment that is late by a few days may not affect a person’s credit score at all. Any payment over thirty days late is considered “missed” and could drop a credit score anywhere from 90 to 110 points, depending on the payment amount. The type of account doesn’t matter.

Missed payments stay on a credit report for up to seven years. They’re not something to be taken lightly. A borrower’s credit score will increase gradually during that time, but it’s unlikely they’ll reach the level they were before the missed payment until several years have passed. Missing multiple payments could also lead to defaults and legal actions.

Being proactive to prevent missed payments

Missed payments aren’t always due to bad financial circumstances. Some consumers fail to make payments on time when they simply “forget” that they’re due. This is common with short-term payment plans from finance companies and retail credit cards that are used infrequently. It can be eliminated by automating monthly payments.

If payments are likely missed because funding is unavailable, contact the lender or credit card company and ask for refinancing or a deferment. A debt consolidation loan is also an option in extreme circumstances where the financial situation is unlikely to change. Most lenders will be willing to work with borrowers if they’re proactive before they miss a payment.

The Bottom Line

There’s no magic bullet to get out of making monthly payments on time. It’s important to automate them so one is not missed by mistake. A borrower should be proactive and contact the lender if they know they won’t have the money to cover a payment. If financial issues are long-term, they can apply for a debt consolidation loan to ease the burden on their monthly budget. Failing to do any of this will cause missed payments to affect their credit score negatively.

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OneMain Financial is the leader in offering nonprime customers responsible access to credit and is dedicated to improving the financial well-being of hardworking Americans.