Are You Close to Delinquency? Check Your Late Payment Categories

With your payment history being one of the biggest deciding factors in your credit score, you need to ensure you make payments without delay. However, like many consumers, expenses unexpectedly come up and you may have credit obligations that have unpaid or overdue payments. While you may forget to write a check for a bill every once and a while, others might have severe delinquencies listed on their credit reports from repeat overdue payments. 

Deliquencies Rising
In an April poll, about 44 percent of U.S. and Canadian bank risk professionals believed delinquencies on credit cards will increase in the next six months, according to a survey by credit score provider FICO. The number of professionals who anticipate a rise in delinquencies for consumer loans also reached a similar number at 43 percent. With the banking industry anticipating more delinquencies that may be reluctant to approve new credit for consumers. Late payments often factor into whether lenders consider you delinquent on your accounts, which could impact your chances of being approved for future loans or credit cards.

When consumers miss even a small payment, they may not recognize the lasting effects unpaid bills have on their credit histories. Missed payments are considered negative items on your credit report and could drop your credit score by double digits. However, the true impact of unpaid bills on your credit score may be determined by the different categories of late payments so it's important to note – and avoid – key categories. 

Categories of Late Payments
Depending on how long it's been since you made payments, you may see more of a hit on your credit score for some late payments than others. 

On your credit report, you may see late payments reported in various categories, including:

  • 30-days late
  • 60-days late
  • 90-days late
  • +120-days late

In general, the more time passes when you are overdue on your payments, the worse this will be seen by creditors. But just how late is too late?

When You Start to Become Delinquent
There is a certain point when lenders will consider you delinquent on your payments and may send these items in collections, which can negatively affect your score. Collections may begin after the 90-days late period or 120-days late point, but it does depend on the creditor and how soon they want to send a third-party collection agency to collect a debt. Another late payment category is called charge off, or when an account is considered in severe delinquency and written off as a loss, which may happen after a payment is 120-days late. Having a record of late payments may send lenders a sign that you may be a repeat offender in not making payments as you should. 

Records of Late Payments Over Time
The time when you begin to be late on payments also is a factor in your credit score. Like with other negative items on your credit report, you may see less of an effect of late payments over time. Records of late payments will disappear from your report seven years after the original delinquency date. However, it's important to make sure these late payments are isolated incidents by growing your history of on-time payments.

Avoid Nonpayment and Build Your Credit
Check the report of your credit history, resolve late payments, items in collections or mistakes you see that are listed in your credit report. After reaching a zero balance on all your accounts, make sure to be consistent in making payments in order to improve your overall current payment history. Be aware of your financial habits to avoid late payments. What might start out as simply forgetting to pay a bill, might snowball, so avoid devastating consequences like having your house foreclosed or having a vehicle repossessed from nonpayment.