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How Late Payments Impact your Credit

Last updated Nov 1, 2023

Whether it was a simple oversight or you’re having trouble making ends meet, a late payment can have a big impact on your wallet and on your credit. Keeping track of all your bills and payments can be challenging, but understanding the consequences of late payments can help you steer clear of letting a missed payment happen and minimize the damage.

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Late payments and your wallet

Every lender is different, but in general, most lenders will penalize you for your late payment.

You’ll be charged a late fee.

If you pay a bill after the due date, most lenders will charge you a late fee. Late fees typically range from $10 to $38, depending on the terms of your credit and whether it’s the first time you’ve been late. If you miss more than one payment, those fees can start to pile up.

Your interest rate may rise.

If you have a variable interest rate (like a credit card), your creditor may increase your rate when you miss a payment. This is most common with credit cards, where your rate could be reset to the penalty APR, sometimes as high as 29.99%1, and you’ll end up paying significantly more in interest. Other products, including personal loans through Upgrade, offer fixed rates that do not change over the life of the loan.

Late payments and your credit

Late payments can be hard to shake from your credit profile, and in turn, can impact the credit and rates you qualify for in the long run.

Late payment is added to your credit report.

Most lenders report late payments to the credit bureaus if you are more than 30 days late. Once this happens, the late payment will show up on your credit report. This is bad news, because a missed payment remains on a credit report for up to seven years  after it was reported — that’s a long time!

Your score may drop.

Speaking of bad news, a missed payment can lower your credit score significantly. Your payment history represents about 35% of your credit score—the single most important factor. How much your score drops after a late payment depends on other information in your report, but in general, the better your score, the bigger the impact.

You may have trouble getting new credit

With a late payment on your credit report and a lower credit score, you may have trouble getting approved for new credit. The impact of a late payment on your credit score will fade over time but recovery can take more than a year.2

What to do if you made a late payment

If you missed a payment, do whatever you can to pay it back quickly so you’re back on track. Look at the options for paying back the missed payment and what you can do to decrease the impact it may have on your credit.

Get back on track with payments

If your bills are past due, pay them back ASAP. Remember, it’s best to have no late payments, but being 60 days late is much worse than 30 days late, and so on. Paying back your full overdue balance will put your credit score back on the path to recovery.

What about partial payments? While a partial payment will probably not stop your delinquency from being reported to the credit bureaus, a good-faith effort to pay at least something may help you get back on track. At the very least, paying something will help you reduce your outstanding balance and the total interest you’ll owe.

Talk to your lender

If you find yourself unable to pay your overdue payment, get in touch with your creditor about payment plans or other options. Many lenders offer extended repayment plans or temporary relief from monthly payments to help you get back on track.

Keep an eye on your credit

Once you bring your account back to current status, make sure no new late payments pop up on your credit report. Learn about steps you can take to repair your credit score, like being diligent about all of your monthly payments, keeping your spending and utilization down, and taking a break from applying for more credit.

How to avoid late payments altogether

We all slip-up now and then, but late payments can be costly mistakes. Here are some tactics to avoid them:

  • Sign up for credit card balance and payment due date alerts. Keep an eye on your spending so you aren’t surprised at the end of the month, and don’t let those due dates sneak up on you.
  • Enroll in autopay. Set up automatic payments so you never have to worry about forgetting a payment again. Upgrade offers autopay for all customers as a convenient way to stay on top of payments.
  • Check your bank account balance. Make sure you have enough funds to cover your payment.
  • Pick a convenient due date. Some people choose due dates right after their paycheck arrives, so they are sure they’ll have enough funds to pay the bill. At Upgrade, you have the flexibility to change your due date to the day of the month that works best for you.
  • Build a budget. And stick to it. Keep your spending in check with a quick budget and good money habits.

Final Thoughts

Missing a payment can be a costly mistake that impacts your ability to qualify for affordable credit in the future, but arming yourself with the knowledge of what can happen can help you minimize the effects on your wallet and on your credit. Before taking on any credit, make sure you can afford it and have a payback plan you can stick to. Responding quickly to a late payment and being proactive about your future payments can help protect your credit in the long run.


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