When do Lenders Consider a Payment Late and What Happens
In a perfect world, people don’t need to get loans or any forms of financing as their income will be enough to cover of their monthly expenses and still have some left to enjoy life with their loved ones. However, we don’t live in a perfect world. And in the real world, there are many people who are not earning enough to cover their daily expenses.
This doesn’t mean they are bad at budgeting or that they are costly. There are just many factors involved that places people in these kinds of situations. When this happens, people turn to loans or get into debt to help them get by. Now, there’s really nothing wrong with getting into debt, considering the many benefits that it can do if used properly. One general rule about debts or loans is to always pay it back on time to avoid any issues or problems with the lender.
Of course, there will be moments when paying on time is not really an option. It could be due to emergency expenses, you were laid off at work, and so on. When this happens you can’t avoid being late for your payment or being delinquent. But when does a lender consider your payment late? Is it already considered late when you are just a couple of days delayed? Or you need to be late for at least 30 days for lenders to label your debt payment as late?
Sadly, there is really no set rule on when a lender should consider your payment late. The decision to label your debt payment as late will really be up to the lender. Some will already consider it late, even if you are just 1 to 2 days delayed, while others will be a bit more generous and consider your payment late only after 10 to 15 days. In general, lenders will consider your debt payment late if you have yet to pay for more than 30 days.
When you’re late for a payment, lenders will usually charge a late payment fee, which means you will be paying more than your usual monthly debt payment. Another thing that will happen is that your credit score will be affected negatively. How negative of an impact will it have? Well, read on to find out more.
How Does Late Payment Affect Your Credit Score
Now, being late with your debt payment will have a negative impact on your credit score. How much of an impact it will have will be dependent on the kind of situation you are in and on the credit bureau that is evaluating your credit history.
There are, of course, some general conditions that will be looked at when it comes to determining how much impact will a late payment has on your credit score. The conditions are as follows:
- First is that the longer you are delinquent in your debt, the greater impact it will have on your credit score, assuming, of course, everything else is equal. This means that being delinquent for 60 days will have a bigger impact than being delinquent for 30 days. Likewise, if your delinquency is already 90-days, the impact it has on your credit score will be bigger than if you are only delinquent for 60 days.
- The second condition that is being looked at is the number of delinquency you already have on your report. Credit bureaus will also be looking at how many delinquents you already have on your credit history. The negative impact of your late payment will be bigger if this is not the first time you are delinquent for a loan payment.
- The last condition that you should know is that the negative impact of your late payment will be bigger on your credit score when it is first reported. But as your delinquency ages, its negative impact on your score will start to decrease. For example, let’s say your credit score of 700 dropped to 650 after a lender reported you are 30 days late for a payment. If there aren’t any other negative issues you have that is affecting your late payment, your credit score should recover slightly the following month. But if there’s a negative impact that affected your late payment, let’s say you were late again, then the recovery of the delinquency will be longer.
These are just some of the general conditions of how much negative impact your late payment can have on your credit score. As mentioned above, it is important to remember that each credit bureau looks at your delinquency differently and one bureau will likely put more weight on delinquency than the other.
How Long Will a Late Payment Stay on Your Credit Report and How Will it Affect You
Now that we know when a lender would consider your debt payment late and how much of an impact it has on your credit score, it’s time to look at how long a delinquency will likely stay in your credit report.
Many negative items found on your credit report will stay there for seven years. This means that if you are delinquent on a debt, that negative item will be staying there for seven long years. Now this countdown will begin once your delinquency has been reported to the credit bureaus. For example, a lender reported your 30-day late payment on October 2018 and you bring the account current in November 2018. This means that your delinquent item on your credit report will be lifted on October 2025.
Likewise, if you have 60-day delinquency and the lender reported it on November 2018 and brought current in January 2019, the delinquency report will then be erased on November 2025. Now seven years is a long time for a negative item to stay on your credit report and this will have an impact on you. The delinquency item on your report will greatly affect your ability to get approved for loans or financing from lenders.
If you do find a lender who is willing to lend you money even if you are delinquent, you will likely get a very high interest rate for it, which means you’ll be paying back a lot more money to the lender for your loan. Fortunately, there are some things that you can do to possibly remove late payment or delinquency item on your credit report. In the next section, we’ll be discussing the different steps you can do to remove this negative item on your credit report.
What You Can Do to Remove Late Payments on Your Credit Report
Being late with your debt payment will have a negative impact on your credit score. What’s worse is that this negative item will stay on your credit report for seven long years, which can affect your ability to get approved for a loan or get good interest rates.
The good thing is that there are several steps that you can do to try and remove the negative item in your credit report. Below, we’ll be discussing each step in detail.
- Request For A Goodwill Adjustment From Your Creditor – The first, and probably, the easiest step you can to try and remove your late payment on your credit report is to request for a goodwill adjustment from your creditor. The process to do this is simple and easy. You just need to write a letter to the creditor and explain your situation. You will need to explain in the letter the reason why you were late for the debt payment, ask them to forgive you for it and have your late payment removed on your credit report and assure that it won’t happen again. This method will require that you have a good payment history and a good relationship with your lender. If you already have multiple late payments, this method will not work.
- Try To Negotiate With Your Lender – Another method that you can try is to negotiate with your lender to have your late payment removed on your credit report in exchange for paying your debt in full or doing partial payments. Some lenders will even offer this deal in exchange for automatic payments, which means you will be signing up for one of their programs of having your monthly payment deducted automatically to avoid any more late payments on your part. Remember to put everything in writing to make the agreement legal and valid.
- You Can Dispute Your Credit Report – Do this method if you are sure that the negative item mentioned in your report is inaccurate. It could be an inaccuracy on the date, on the amount, and so on. Sometimes, lenders would make mistake about your late payment report to credit bureaus. If you notice the inaccuracy, you can dispute it with the credit bureau. Just remember to inform your lender that you are disputing their report. They will usually have a department that handles credit report disputes.
- Hire a Credit Repair Company – Trying to have the late payment mark on your credit report removed will require time, patience, and a bit of effort on your part. If you don’t have the patience for this or if you’re really not sure what to do, then you can always turn to professional help. There are many good and affordable credit repair companies out there that can help you with this problem. Just remember to avoid companies that require upfront payment before helping you and those who are promising things that are too good to be true, as there are also scam credit repair companies.
These are just some of the steps that you can take to try and remove the late payment mark on your credit report so that your credit score will not be dragged down. If none of these methods work, you will just have to wait for the negative item to age in your credit report so your credit score can improve.
Applying for a loan or being in debt is not an unusual situation, considering that a lot of people today are just barely getting by with the money they are earning from their jobs or business. And we’re just talking about daily expense here, emergency financial situations like getting hospitalized, a need to repair the house or car, getting laid off at work, etc. are not even included.
This why there are now more and more people incurring debt, as it helps them to cover the expense that their income cannot. When it comes to debt, it’s important that you try to pay off your debts on time to avoid incurring late payment fees and having your credit score negatively impacted. Unfortunately, you might be put into a situation where you will have no choice but to be late for a debt payment.
The problem here is that negative items will not only affect your credit score, but it will stay on a credit report for at least seven years, affecting your ability to get approved for a loan. But don’t worry, as there are some ways that you can do to prevent the delinquency to be put in your credit report. These steps, though not guaranteed, may get the negative item off your credit report earlier.