Nobody's perfect. Maybe you went on vacation, and you didn't realize your credit card bill was due. You might not have received your bill in the mail. Or maybe you just didn't have enough money this month to make your minimum credit card payment.
How bad can it be to miss or be late on one credit card payment? It's not the end of the world or even your credit. But it could cost you — in late fees, higher interest rates and by lowering your credit score. Here's what happens:
You get charged a late fee
The first thing that happens when you miss a credit card payment is that you get a late fee. By law, your first late fee could be as much as $28, or the amount of your minimum payment, whichever is less. You can be charged a late fee the first day your minimum payment is overdue.
Credit card companies charge different late fees up to the legal limit, depending on the card you have and your credit card agreement. Check your agreement to be sure, or look for “pricing and terms” on your bank's website.
If you're late again within the next six billing cycles, it gets worse. By law, your second late or missing payment can cost you up to $39, although it still cannot exceed your minimum payment due.
See related: 5 ways to avoid (or deal with) late fees
Your credit score drops
If your payment is just a few days late, it won't affect your credit report.
“If it's less than 30 days, you're fine,” says Chane Steiner, CEO of Crediful.
Once it hits the 30-day mark and is reported to the credit bureaus, however, the damage can be significant. Steiner says, “Your credit score can drop by more than 100 points.”
The damage done by one negative mark to an otherwise pristine credit history is remarkable. Think of it like the first scratch on a new car — it shows up more than it would amid a long list of negative reports.
“Many people don't realize the negative impact one payment exceeding 30 days late can have,” says Steiner. “Not only does it hurt their credit score, but it remains on their credit report for seven years.”
Not everyone is affected the same by one late payment on their credit report.
“There are approximately 220 million people we report on, and every one is unique,” says Rod Griffin, director of consumer education at Experian. “The closer you are to perfect, the further you have to fall. A person with poor scores already has less distance to drop.”
However, that smaller drop may affect someone more if they start with a lower score, or if their score is closer to a cutoff point.
“If you have a score of 840 and your score drops 50 points, you're still likely to get the best terms and the best rates,” says Griffin. “The impact is also relative. If your score is 700 and you lose 20 points, you're at 680, you may or may not still qualify and you may have to pay higher rates.”
One thing is for sure. Just one missed payment will have a negative impact on your score.
Your interest rate goes up
If you are more than 60 days late on your credit card payment, your bank can increase the interest rate on your account. You're now paying higher interest expenses on that balance you can't get rid of. Between late fees, missed payments and higher interest rates, that balance can grow at an alarming rate.
Back in the days of universal default, you could miss a payment on one card, and suddenly all your credit card interest rates might go up. Universal default was ended by the federal Credit CARD Act of 2009.
The interest rates on the existing balances on your other credit card accounts, on which you have remained current, cannot go up without notice because of this missed payment. However, credit card companies may raise your rate with 45 days' notice and let you pay off your balance under the old terms.
If your credit score goes down, you also may have trouble getting new credit, or you may have to pay a higher interest rate when you do.
My payment is late. What can I do?
If your minimum credit card payment is late, don't panic. Make the payment as quickly as possible, and contact your lender to see if they will remove any negative mark on your credit report.
Griffin says if you've never had any other issues with them, they very well may.
“Even if they don't, if you have a strong credit history, it's going to recover,” he says.
If you dispute the late payment or have extenuating circumstances – for example, if you had a problem with online bank payments – you can always add a statement to your credit file and tell your side of the story. Provide documentation if possible.
“It can help, particularly if it's a large transaction,” says Griffin.
The most important thing you can do after one late payment is to immediately start building your good credit history again.
You can do some things to improve your score right away, such as paying down debt to reduce your credit utilization rate, or diversifying the types of credit you use. Don't spend money or go into debt just to improve your credit. You can build credit just by making small purchases on a credit card and paying the balance off every month.
You can also add positive information to your credit report to help counteract the negative mark. In the past, utility companies and some other creditors only reported to the credit bureaus when something went wrong. You didn't get any credit when things went right.
Now, through services such as Experian Boost, you can have positive information from utility and cellphone bill payments reported on your credit history.
Keeping your credit history clear of negative marks in the future is not difficult if you dedicate time every month to taking care of your finances. Make sure you know when your credit card payment due dates are, and send your payment at least a week ahead.
Consider setting up autopay, either for the full amount or for a minimum amount every month, so you know you'll never miss a payment. If you have too many credit card payments to keep track of, you might need to simplify your finances by closing one or more of them. Find a system that works for you.
“Even something as simple as a checklist to confirm all payments have been made is helpful,” says Steiner.
Don't be late again
Never assume that if you already have a less-than-perfect credit score, the game is over and another late payment won't matter.
“It certainly matters,” says Griffin. “In order to restore or rehabilitate your history, every positive piece of information and every negative piece of information matters. A single late payment will make it take longer to rehabilitate your history.”
Every month, new information, good and bad, may be added to your credit report. Newer payment history has a greater impact on your credit score than older payment history, and late payments eventually fall off your credit report altogether.
The effect of new, negative information is not just how your credit score goes down now. It's that because it is new, it increases the time it takes to age out and disappear.
From now on, be sure to check your credit report regularly, so you know what's in your report. You can check your credit report for free at AnnualCreditReport.com, so there's no reason not to.
“We're still disappointed in the number of people who request a report,” says Griffin. “Less than half of people who qualify for a free report request it. Everybody should get their report and know what's in it.
“Your credit history isn't like the history books in school. You can change it. If your credit score is trashed, that doesn't mean you can't clean it up,” says Griffin.
Try to avoid any late payments on your credit history. But if it happens, don't take it personally, and don't give up. Take steps to avoid having it happen again, and then move on with your life.