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Last updated on 20th of January 2022

Do Late Or Missed Payments Affect My Credit Score?

If you fail to honour payments as originally promised, this could have an impact on your credit report and ability to borrow money in future. But do late or missed payments affect your credit score too? Read on to learn more.
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When you take out a line of credit such as a mortgage, phone contract or loan, you’ll have to sign an agreement to say you will follow certain rules set by the lender.

The lender will usually outline how much you need to pay them each month and what date these payments must be made.

If you fail to honour these payments as originally promised, this could have an impact on your credit report and ability to borrow money in future.

But do late or missed payments affect your credit score too? Read on to learn more.

Do late or missed payments affect my credit score?

When you pay late or miss a payment completely, your lender will usually contact the three main credit referencing agencies (TransUnion, Equifax and Experian) to let them know.

The credit referencing agencies will then add this information to your credit report, where it can be seen by other lenders whenever you apply for a line of credit.

Lenders will take your credit history into consideration when deciding whether to approve your application or not, so it’s really important that you keep your credit report as healthy as possible.

Late or missed payments can affect your credit score too. This is usually a number ranging from 0 to 999 and is a reflection of your credit report as a whole. 

How important is my credit score?

Your credit score is a reflection of your borrowing habits and ability to manage debt effectively. 

If a person has a low credit score, this might mean that they’ve struggled to manage their debts in the past. However, it’s also possible to have a low credit score due to a lack of borrowing history. 

Having a low credit score can make it harder for lenders to approve your loan applications in future, but some lenders specialise in lending to people who don’t have a perfect track record.

Although your credit score is important, lenders are usually more concerned about your overall credit history.

Lenders look at a number of factors before deciding to let you borrow or not. This may include the types of debt you’ve had in the past, how well you’ve managed them and how much debt you have outstanding at the moment. 

They might also look at existing lines of credit that you have available, even if you’re not using them currently. 

If a lender looks at your credit report and sees that you’ve missed payments in the past or you’ve struggled to pay on time, they might worry that you’ll do the same after borrowing money from them.

Does one late payment affect my credit score?

Some people assume that missing the odd payment or paying a few days late won’t make a difference as long as they manage their debt well most of the time.

Unfortunately, this isn’t true. Even one or two late or missed payments can affect your credit score. 

However, this doesn’t mean your credit score is ruined. If everything else on your report is favourable, you can improve your score by maintaining good financial habits.

By making sure all your debts are paid on time and in full, you can regain lenders’ trust and boost your chances of getting loans in the future.

What counts as a late payment?

If you forgot to make a payment on the day it was due but you pay the money a day or two later, there’s a chance this mistake won’t be recorded on your credit report and your credit score won’t be affected. 

Most lenders have grace periods that can range from one day to 10 days. These grace periods are designed to protect people from minor mistakes or banking problems. As long as your money arrives within the grace period, you should be okay.

However, each lender has different rules and some are more strict than others. While some lenders are flexible, others may be quick to report a late payment to the credit referencing agencies. 

When taking out a line of credit, make sure you read the fine print on your account agreement. This should explain whether a grace period applies and how long it lasts. 

It’s wise to maintain good habits from the start and avoid relying too much on grace periods. You might convince yourself it’s okay to pay a day or two late but if you then forget to make the payment in time, this could impact your credit score. 

What should I do if I miss a payment?

If you’ve realised that you’ve missed a payment, pay the money as soon as you can. 

Maintaining good financial habits can get you back in lenders’ good books and improve your chances of getting loans in future. 

Here are a few ways to improve your credit score.

Avoid too many applications in a short space of time

Did you know that every time you apply for a line of credit, this shows up on your credit report? 

If a lender looks at your report and sees that you’ve applied for a personal loan, credit card and phone contract in the space of a few months, this may harm your chances of getting approved. 

Some lenders may see this as a sign you’re desperate for credit and could struggle to repay the money you owe.

It’s a good idea to space out your applications as much as possible, particularly if you get rejected. One rejection can lead to another and then another. 

Register to vote

If you’re not already registered to vote, getting on the electoral roll can boost your credit score. This is because it makes it easier for credit referencing agencies to confirm your identity and address. 

Set up direct debits

Make life easier for yourself and avoid missing more payments in future by automating your payments. By setting up direct debits, you can take the hassle out of the process and ensure your payments are made, whether you remember them or not. 

Missed payments can be bad for your credit score, but by managing your finances as best as you can and showing you’re a trustworthy borrower, you can improve your credit rating over time.