July 17
Category: Playbook
Why On-Time Credit Card Payments Matter
Making your credit card payments on time plays a critical role in maintaining a healthy credit score. When you miss a payment, you don’t just face a small inconvenience—you risk late fees, higher interest rates, and long-term damage to your credit report.
How Late Payments Impact Your Credit Score
You might wonder, what does a late payment really do to your score? Credit scoring models treat late payments differently based on how late they are.
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30- and 60-day late payments hurt your score most in the months they occur. Fortunately, their impact fades over time if they’re isolated incidents.
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90-day late payments are much more serious, especially if they happened in the last 24 months. These can drag your score down significantly.
Regardless of whether you’re late by 30, 60, or 90 days, the result is the same—your credit score suffers. That’s why it’s essential not to drop the ball. When you miss a payment, creditors respond in ways that can affect you for months—or even years.
Remember, the ball is in your court. Step up and make the play—or in this case, the payment!
Five Things That Happen When You Pay Late
1. Your Creditor Charges a Late Fee
You’ll see a late fee on your next billing statement, usually ranging from $15 to $35. If you continue missing payments, the fees will keep coming.
2. Your Interest Rate Increases
Creditors often raise your rate to the default rate after a missed payment. As a result, you’ll pay more in finance charges, making it harder to pay off the balance.
3. Other Card Interest Rates Might Rise
If your other credit cards include a universal default clause, those issuers might also raise your interest rates—even if you paid them on time.
4. Credit Bureaus Get Notified
Once your payment is over 30 days late, creditors report it to the credit bureaus. This late mark appears on your credit report and stays there for seven years.
5. Your Credit Score Drops
Your payment history makes up 35% of your credit score. That means even one late payment can significantly reduce your score. A lower score affects your ability to qualify for new credit, and in this game—you’re stuck sitting on the bench.
Defensive Tip: Set Up Auto-Pay
To avoid late payments, set up auto-pay on all your credit cards. Even if life gets hectic, your minimum payment will go through on time. This simple move is what Credit Coach calls strategic planning—a small effort that brings big rewards.