That teeny-tiny missed payment from 5 years ago is starting to look not so teeny-tiny now, huh?
Your missed payment has a greater impact on your life than you expected, and now you’re looking for some resolutions. Let’s get down to business and talk about what got you here and how we’ll keep you away from this sticky situation moving forward.
The Importance of On-time Payments
Creditors love working with people who’ve proven that they’re able to make their payments on time. Because you’ll depend on creditors throughout your life, it’s best to stay in their good graces.
Being a reliable borrower, renter, and bill-payer reassures creditors that the two of you will have a mutually beneficial relationship. Creditors’ adoration for responsible spenders leads them to review credit reports cautiously.
Your credit report is just like your elementary school report card but for your finances. The report details your amounts owed, credit history length, credit mix, and, yes, your payment history.
It Stays on My Credit Report?
Sadly, yes, missed payments leave a lasting impression on your credit report. If you’re late on paying your bills by over 30 days, a creditor can report your missed payments to the three credit bureaus (Experian, Equifax, and TransUnion).
Once a late payment is reported, the mark leaves a stain.
Does My Credit Score Even Matter?
Your credit score absolutely matters, and we’re upset you haven’t heard by now. A negative credit score can damage your ability to take out loans, buy your first car or home, and will follow you through many aspects of your life.
Credit Wizard Counsel: Check out the Extra Blog for a bunch of deep dives on the role your credit score plays in life.
A credit score follows you around throughout your financial decisions. In the same way that an excellent score can unlock new opportunities for you, a bad score can easily hold you back. Your credit position today is the first block to fall in a domino effect towards your future.
A poor credit score can cause you to pay higher interest rates on loans, leading to more significant debt and a worse financial position. Everything starts with a well-maintained credit score.
How Long Do Late Payments Stay on My Credit Report?
One late payment remains on your credit report for up to seven years and has a pretty big impact on your journey.
A late payment has less of a toll on your score as time goes on, but most of us will need our credit in good health before the seven years is up. There are plenty of other components that affect your credit score for you to work on, but making on-time payments is a major player.
Can’t I Just Fix It?
You missed a payment five years ago, and you’re hoping that there’s an easy fix. If you were the Credit Wizard, a fix would be a simple task, but sadly, you’re just a mortal card swiper.
Don’t fret, there is a way, even as a humble card swiper, that you can improve your credit report.
How To Remove Late Payments From Your Credit Report
First things first, ask the credit bureau to pull up the receipts (your credit report). If you’re sure that you never missed a payment, make sure they get their facts straight. Gather all of the statements and information you need to dispute the error that’s been reported.
Once you file your dispute, be sure to keep all of your documents on hand just in case a bank, lender, or card issuer doesn’t have the latest deets.
If the credit bureaus are correct and you did miss a payment, it’s time to roll up your sleeves and get to fixin’. One of the best ways to get that missed payment off your record is to write a goodwill letter.
A goodwill letter, also known as a late payment removal letter, is a plea for forgiveness that you should have no shame in asking for. If you were going through a rough financial situation and couldn’t make a payment on time, you should ask the creditor that reported your slip up to remove the mark from your credit history.
If the person who reported your late payment is in the mood to empathize with your situation, then they can help your credit score a ton. Remember to thank this empathizer, maybe (hopefully not) you’ll need their help again!
Having your missed payment removed from your credit report will help your personal finances immediately and in the long run.
How To Avoid This Debacle Again
Because your payment history has such long-term implications, you don’t want to again find yourself in this situation. Here are a few spells the Credit Wizard will cast for a squeaky clean report, think of the following as affirmations.
Spell #1: You will avoid late payments at all costs
You can keep up with your dues by setting reminders in your calendar or enabling automatic payments towards your credit cards and monthly bills.
Spell #2: You will keep the receipts
Whether you’re on good or bad terms with your creditors, the best way to ensure your credit report is accurate is by keeping records. You never know when you’ll need to dispute a statement or write a goodwill letter, so it’s best to have all the facts on hand. Managing everything on your own is a big ask, so consider working with a financial advisor.
Spell #3: You won’t add bills to your plate that you can’t handle
The number one culprit for missed payments is poor money management. Swiping away with a credit card and signing up for unnecessary subscriptions can leave you in a bottomless pit of bills. Avoid spending money that you don’t have by using a debit card.
Now that you know the risks of missing a payment, you know the importance of money management.
The Extra debit card was designed to help you better your financial situation. By keeping you away from debt, making budgeting simple, and contributing to your credit reports, Extra is a valuable tool that everyone should keep in their tool kit.