How Late Payments Impact Credit Scores

FICO scores, the Fair Isaac Corporation credit-scoring system, are used by lenders to determine your creditworthiness. The lower your scores, the more risk you pose to lenders, resulting in higher interest rates or loan denial.

Scores fluctuate for many reasons, including your debt-to-income ratio, making minimum payments only, credit inquiries and other factors. But nothing impacts credit scores like a missed rent or revolving credit payment. And, for the best-scoring consumers, the drop in credit scores is the most punishing.

Making timely payments is one of the easiest things you can do to show you’re using credit responsibly, which is why your payment history accounts for the largest part of your FICO score—35 percent.

Late payments remain on your credit report seven years from the original delinquency date, regardless if the payment is made and the account is current or if the account is closed and the payment is never received, according to Experian.com.

The more recent the late payment, the more it can impact your scores. If you’re late or missed a payment, make the account current as quickly as possible. The length of time it takes to recover will depend on whether the late payment is an anomaly or part of a habitual pattern.

Establish a current history of on-time payments. Use at least one credit card, paying in full each month to avoid finance charges.

On-time payments will add positive activity to offset negatives from the past, and over time your credit scores will rebound.