I was so rushed to pack for Europe that I forgot to schedule my normal credit card payment for the first of the month! As a result, I missed my $535 credit card bill completely and didn’t realize it until three days after due date!
The first thing to realize is it’s not the end of the world if you accidentally miss a credit card payment. Things like this happen all the time, and the hammer does not fall on your credit score so quickly.
The second thing is there’s a grace period to how late you can be before getting hurt. Being three days late is much different from being 30 days late. But being 90+ days late is a disaster!
The final thing is credit card companies want to make money off you. Paying late or not in full every month makes them an estimated $60 billion+ a year! If credit card companies knew you would never default, they’d happily let you pay late all the time!
TWO STRATEGIES FOR HELPING WAIVE LATE PAYMENT FEES
1) Ask for forgiveness. Your first option should be to call your credit card company and ask for forgiveness. I have been late on my credit card payment four times in 180+ months of payment always because I forgot. Each time I was late, I called the credit card company within seven days to explain myself and ask whether they would wave the $25 missed payment fee and accept payment in arrears. Each time they said yes, partly because I have demonstrated years of regular payments, and partly because I always called shortly after realizing I was late. As a result, my credit score was not hurt, and if it was hurt, it still stayed above 780 so who cares. Just make sure to ask whether they’ve reported you to the credit bureaus.
2) Threaten to leave. If forgiveness doesn’t work, your second option is to threaten to cancel your account after payment. Given there are an endless amount of credit cards available to choose from, your credit card company doesn’t want to lose you as a customer. The only problem with changing credit cards is that it’s a pain to update credit card info with existing accounts that have your information e.g. Amazon, cable company, insurance, etc. Given your boldness usually works to get your fee waved, your credit score should also not get negatively impacted if you are talking to them within a week. I had one case that succeeded, and my credit score remained the same. I had one case where the rep just wished me good luck, and my credit score was not negatively impacted from what I could tell.
But what if your threat doesn’t work and you really love your existing credit card? No shame in going back and asking for forgiveness again! After all, you were the one at fault, not them. As one reader mentions below, she called back several times to ask for forgiveness and finally found one representative who waived her fees while all others would not!
WHEN THE HAMMER FALLS ON YOUR CREDIT SCORE
The big problem occurs when you are more than 30 days late with your credit card payment. More than 30 days means that you are entering your second billing cycle and your account is now elevated to warning status. 60 days late is the next warning level until you are considered delinquent at 90 days. At this point, no amount of begging or threatening will be able to wave your late fees and save your credit score.
It is estimated by FICO that……..
If your credit score is 680
- Your score will drop 60 to 80 points to 600-620 on average and as low as 530.
- Your score will drop 80 to 110 points to 650-610 and as low as 525.
If your credit score is 780
- Your score will drop 90 to 110 points to 670-690 on average, and as low as 620.
As you can see, being late on your credit card payment can severely damage your credit score. Going from a 720 to 600 means car loans will likely be 2-3% higher than optimal. Your mortgage rate will also be at least 1.5% higher than the best rate which adds up to huge increased payments over the long run!
HOW LONG IT TAKES TO IMPROVE YOUR CREDIT SCORE ONCE DINGED
* 680 credit scores can take up to 9 months to recover.
* 720 credit scores can take up to 2.5 years to recover.
* 780 credit scores can take 3 whole years to fully recover!
The good news is that credit scores can recover after a 30 day+ late payment if you pay consistently again over time. The bad news is how long it takes for really good credit scores to recover if you are in delinquent status. Three years to get back to a 780 from a 600-level score is an eternity for some people.
For those who have busy lives or who are always traveling, consider employing an autopay on your credit card account. Calculate the average amount of money you spent on your credit card for the past 12 months, divide by 11 to give you a buffer and put that amount on auto pay. This way, you’ll never miss a payment. It’s not a big deal if you pay more than you owe either since the payment just acts as credit for the next month’s cycle. Having autopay on your mortgage is a given.
Check Your Credit Score: If you don’t have a credit card like the Discover it card to provide free FICO scores, then take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance. The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is?
Updated as of 10/27/2014