How many points does your credit drop for late payment

With so many bills to keep track of, it can be easy to miss a payment. A late payment can be no big deal if you catch it right away, but the longer your bill is past due, the greater risk it poses to your credit.

Late payments can appear on your credit report and stay there for seven years. In addition to hurting your credit, late payments can also cost you money. First-time late fees cost up to $29 and that rises up to $40 for subsequent missed payments made within six billing cycles.

If you recently missed a payment, here’s what you need to know about the impact of late payments on your credit.

How long do late payments stay on your credit report?

Late payments remain on your credit reports for seven years from the original date of the delinquency. Even if you repay overdue bills, the late payment won’t fall off your credit report until after seven years. And no matter how late your payment is, say 30 days versus 60 days, it will still take seven years to drop off.

Since payment history is the most important factor of your credit score, one late payment can make a big impact on your credit. However, the impact of a late payment lessens over time, especially if it's only a one-time mistake and you counteract it with on-time payments. You have a 30-day window to repay a late bill before it appears on your credit report. Anything more than 30 days will likely cause a dip in your credit score that can be as much as 180 points.

Here are more details on what to expect based on how late your payment is:

• Payments less than 30 days late: If you miss your due date but make a payment before it’s 30 days past due, you’re in luck. Creditors don’t report a late payment to the credit bureaus until it’s 30 days past due. However, you may still incur a late fee.
• Payments 30 or more days late: Once a late payment is 30 days overdue, it will appear on your credit report. You’re still responsible for making up the missed payment, so repay it as soon as possible.
• Payments more than 60 days late: If you don’t repay the late payment and miss your next due date, a 60-day late notice will appear on your credit report. This can hurt your credit score even more. And if you miss several payments, more notices will show on your credit report, your debt may be sent to a collection agency and your creditor will likely close your account.

Late payments appear on your credit report under the account that you haven't paid. So if you're behind on a credit card, there will be a note in that section of your report saying you're 30, 60, or 90 days late (and so on).

How to avoid late payments

Some credit cards have no late fees, like the Petal® 2 "Cash Back, No Fees" Visa® Credit Card. But a late payment still puts you at risk of hurting your credit score. Card issuers report your payment to the credit bureaus if it's 30 or more days late, regardless if they waive late fees.

To prevent negative information appearing on your credit report, learn how to avoid late payments by following these steps.

Set up autopay

The simplest way to prevent late payments is to set up autopay. It only takes a minute to set up autopay and customize your payment for the minimum due, your total statement balance or another amount.

Set payment reminders

If you don’t want to set up autopay, create calendar reminders or opt-in to text and email alerts through your creditors. You can choose alerts for when your statement is available, when your payment is due in a set number of days, when your payment posts and more. Note that these options may vary by creditor.

Change your payment due date

You likely have a handful of bills to pay each month, which means your due dates are spread out over the month. It can be hard to keep track of multiple due dates, so consider adjusting your payment due dates as needed. You can make your bills due on the same day or right after you get paid.

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Petal 2 Visa Credit Card issued by WebBank.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

There are general guidelines you can follow to build your credit score. But what's often overlooked are the actions you take that actually ding your score, even if you were doing something you thought was positive.

The good news is that many credit score dings are temporary and can be easily recovered. And oftentimes, actions like paying off a loan or applying for a new credit card will benefit you in the long term once you get past the initial fluctuation. 

Below, CNBC Select outlines the five ways you may be causing your credit score to suddenly drop — whether you realize it or not.

1. You applied for a new credit card

Card issuers pull your credit report when you apply for a new credit card because they want to see how much of a risk you pose before lending you a line of credit. This credit check is called a hard inquiry, or "hard pull," and temporarily lowers your credit score a few points. Hard inquiries remain on your credit report for two years, but FICO (which most lenders use) only considers inquiries from the last 12 months when calculating your credit score.

But hard inquiries on your credit report aren't necessarily bad when they happen in moderation. After all, applying for credit cards is a great first step in building credit. When you use credit cards correctly — by charging purchases and paying them off in full by the due date — they can help increase your credit score. If you're looking to build credit, consider the Petal® 2 "Cash Back, No Fees" Visa® Credit Card, which offers cash back, or the Capital One Platinum Credit Card that is designed for average credit applicants.

To reduce the number of unnecessary hard pulls on your credit report, check if you qualify for a new card by using issuers' preapproval or prequalification offers. These won't guarantee that you'll be approved for the specific credit card, but they'll give you a good idea.

When it comes to actually applying for new credit products, be sure to spread out your credit card applications over time. Only apply for a new credit card every three months, and maybe wait even longer between applications if you have a lower credit score.

2. You charged a large purchase onto your credit card

Credit cards are convenient for making large purchases because you don't need to pay all the money upfront, but leaving a high balance on your card will report a higher credit utilization rate (CUR) to the credit bureaus.

Your utilization rate, or your debt-to-credit ratio, measures how much credit you use compared to much you have available. You want to aim for a low utilization rate because using too much of your available credit limit shows that you pose a financial risk to issuers. Experts recommend keeping your credit utilization below 30%, with some even suggesting below 10% to get the best credit score.

Before you charge a hefty expense onto your credit card, make sure you can pay it off in full before the billing cycle ends. Carrying a high balance on your credit card is not only bad for your credit utilization rate, but it will also incur a whole lot of interest. 

3. You missed a credit card payment

Because your payment history is the most important factor that determines your credit score (making up35% of your FICO score calculation), missing a credit card payment will have an immediate negative effect on your score. Needless to say, lenders and issuers care a lot about whether you've paid your past credit accounts on time because they indicate your risk.

According to FICO data, a 30-day missed payment can drop a fair credit score anywhere from 17 to 37 points and a very good or excellent credit score to drop 63 to 83 points. But a longer, 90-day missed payment drops the same fair score 27 to 47 points and drops the excellent score as much as 113 to 133 points. In other words, the higher your credit score, the greater the negative effect will be.

How quickly your score bounces back after a missed payment varies depending on your credit history and your payment behavior after you miss a payment. If you jump back on track quickly after, it's likely your score will start improving along with your good payment history. A history of on-time payments is vital to a good credit score, and it's even better if you can pay them in full.

4. You paid off a loan

While paying off your credit card debt can increase your credit score, paying off installment debt, such as a mortgage or a student loan, has the opposite effect. 

Paying off something like your car loan can actually cause your credit score to fall because it means having one less credit account in your name. Having a mix of credit makes up 10% of your FICO credit score because it's important to show that you can manage different types of debt.

Don't let this prevent you from paying off your loans, however. Being debt-free will help your overall financial health, and it makes no sense to pay unnecessary interest charges over time just to save a few credit score points.

5. You closed your credit card

Closing a credit card account, especially your oldest one, hurts your credit score because it lowers the overall credit limit available to you (remember you want a high limit) and it brings down the overall average age of your accounts. The length of your credit history makes up 15% of your FICO score, which is why experts recommend building credit at a young age. The longer you can show you have had credit, the better for your credit score.

The exception to this is if you are paying for a credit card that you no longer use. In today's world where travel is nearly nonexistent, that may mean closing your luxury travel credit card with a steep annual fee, like the Chase Sapphire Reserve®, which new cardholders pay $550 per year for. It could also mean closing your secured credit card that you paid a deposit for to receive a credit limit, such as with the Capital One Platinum Secured Credit Card.

Before closing your card, talk to your issuer and see if you can either downgrade to a no annual fee card or, in the case of a secured card, upgrade to an unsecured credit card. This could help you preserve the credit line so that it doesn't show up as being closed on your report, while getting you a card that's better suited for your needs.

Information about the Capital One Platinum Credit Card and Capital One Secured has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.

Petal 2 Visa Credit Card issued by WebBank.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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