One late payment can kill your credit score. Therefore, it is very important for you to be diligent and pay all your bills one time. The higher your credit score, the easier it is to access credit (borrow money). In addition, you get to borrow money at a lower rate.
FICO gave a small peek behind the curtain at how their scoring model works and showed just how much mortgage delinquencies affect your credit score.
The example they gave drew attention to three different FICO scores on the higher end of the spectrum (680, 720, and 780) and how one late payment of 30 days affected each score.
According to FICO, the impact of a 30-day late payment on a consumer's mortgage varies greatly depending on how high the consumer's credit score already was.
How One Late Payment Can Hurt Your Credit Score
Here's how much one late payment can hurt your credit score depending on your current credit score:
- People with a 680 saw their score drop to 530.
- People with 720 saw a drop down to 525.
- People with 780 saw their credit scores drop as low as 620.
How Long It Takes For Your Credit Score To Recover After A Late Payment
Most consumers probably already know it ll take a while for their credit scores to bounce back. However, here's how long it will take for your credit score to recover after one late payment.
- It takes a 680 up to 9 months to recover.
- 720 scores can take up to 2.5 years to recover.
- 780 credit scores take 3 whole years to fully recover.
Interestingly enough, consumers don't lose more points for going forward with a short sale; the impact to their credit scores is just as bad as an outright foreclosure.
If you're looking to get the best credit score possible, here's my article on how to get a credit score of 800 or higher. Currently I have a 847 credit score.
Don't Let One Late Payment Kill Your Credit Score
As you can see, the higher your credit score already is, the more you have to lose. Missing a payment hurts high credit scores the worst and it takes longer to recover.
Indeed, their scoring methods almost remind me of how I was graded in high school. You had to work hard to achieve and maintain an A+ in class. However, the minute you slipped up and missed an assignment, your grades began to fall. You are left to fight a long, uphill battle to get your grades back up.
Similarly, those with the highest credit scores get hit the hardest by slipping up on something as seemingly innocuous as missing one payment date. Just look at the 780 score. One late payment means losing as many as 160 points. Further, you will have to wait up to 3 years for a full recovery!
So what have we learned? Every little detail matters to your credit history and scores. Don't slip up!
If you are looking to refinance a mortgage, get a car loan, borrow money for school, or get a job, it is imperative that you not only know your credit score. Further, also verify your credit report is free from errors. Studies have shown that roughly 30% of all credit reports have errors.
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