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Late Payments and their Effects on Credit Reports

By Ruth Racey
Published: Sunday, September 20th, 2009

Cardholders who regularly monitor their credit expenses often fret about late payments and how they can affect their credit scores and ratings. For diligent consumers, keeping a clean credit report is essential to get low interest loans, extended credit, and other benefits.

While delayed payments do actually have a direct impact on credit scores, some late payments leave more damage done others. Many Americans often misunderstand that not all delayed payments are the same. Some payments do not affect credit reports at all while more substantial late payments can have a negative impact on a cardholder’s credit records.

Being late for just a few days will definitely result in surcharges, fees, and penalties from the creditor or card company. Banks and card issuers would often charge higher interest rates and slap on penalties for consumers a few days late in their payments. These delayed payments, however, are not recorded in the cardholders’ credit reports. Neither will they affect the consumers’ credit scores and ratings.

Failing to settle dues for just a few days will not require creditors and banks to report cardholders to the credit bureaus. As long as the consumers pay the required minimum amount, their credit reports are relatively safe from any long-term effects.

However, failing to pay the required amount for more than 30 days would pose a problem for cardholders. Card issuers and creditors usually report payments that are more than 30 days late to the three credit agencies, Equifax, TransUnion, and Experian.

The delayed payments are considered delinquencies and will stay with the cardholders’ credit reports for seven years. That period is the maximum length of time for which a credit report can keep all financial records, both good and bad. Seven years can be a long time especially for Americans who need to get good rates and credit from banks and creditors.

Having a delinquent report can also mean a substantial drop of the credit score. Payments made more than 30 days after it is due can cause credit scores and ratings to drop 50 to 75 points. Recovering the loss can take more time and a lot more effort for the cardholder.

Of course, there are ways to repair an ailing credit report. Some websites even offer credit repair services to help consumers get back on their feet and avail of more financial support from potential creditors and lenders. Keeping track of payment due dates and paying on time can help maintain a clean credit report.

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