How quickly can my score recover from a late payment?

Some points may return as soon as you mend the error; others will take longer

Speaking of Credit columnist Barry Paperno
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes "Speaking of Credit," a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.

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Question

Dear Speaking of Credit,
My credit score dropped over 50 points and my husband’s fell 105 points for one 30-day-past-due car payment. We had been in good standing for almost two years before that mistake.

Will my late payment be reported as paid now that I have paid it? And if so, will that bring the score back up? A drop of 105 points is a lot!

We’ve been trying to work on our credit to buy a house. Thanks. – Tina

Answer

Dear Tina,
Sorry to hear of this setback following your diligent credit rebuilding efforts over past couple of years.

As you will see, despite these score losses, your hard work has not been in vain. Yet a good dose of patience may be required over the coming months as you look to undo the credit score damage from this untimely mistake.

Late payments are not forgotten quickly

While credit scoring formulas tend to be quite forgiving of past misdeeds, some, such as late payments, are not soon forgotten. Payment history is the most important factor in credit scoring, accounting for 35 percent of your score.

Now that your payments are back up-to-date, let’s take inventory of which score factors should immediately return most, if not all, of those lost points, and which will do so over an extended period of time.

Points you get back quickly after a late payment

With your payment that catches up the past-due amount, the lender is likely to report your loan with the status of “current - was 30 days delinquent.”

While it’s sad to think that the 30-day delinquency will continue to be reported for the next seven years, being current again brings back many points and gets you back on the right path right away.

Those next updates to your credit reports also will note that amount of the past-due payment has been reduced to $0.

Late payments: The higher the amount, the larger the potential score damage

This “amount past due” score calculation was surely a major factor in the large credit score drops you and your husband saw, as the higher this amount the more potential damage to your score.

 

Video: How payment history affects your credit score

And since the typical car payment is in the hundreds of dollars, a 30-day late car payment tends to hurt your score more than a credit card account with a late $15 minimum payment.

Fortunately, once the past due amount goes back to $0, your account’s status returns to “current.” This means that all of the points deducted for this factor should return to the score with no lasting harm done.

For you and your husband, both of these updates – account status and amount past-due – should go a long way toward recouping many of those missing points with the loan company’s next updates to your credit reports.

Points that return slowly over time after a credit slip

We often talk about the critical effects of “recency” when discussing how scores recover from past late payments.

That is, the length of time since your last late payment is so important to your credit score that it usually outweighs most other delinquency-related calculations, such as the number of months the account was reported late or the number of accounts with late payments.

As you undoubtedly experienced with the rebuilding of your credit over the past couple of years, scores gradually rise as the number of months since that last blemish increases.

Unfortunately, you will now once again have to re-establish a spotless payment record going forward for some time to achieve mortgage-worthy scores.

How long it takes to fully recover from a late payment

You have clearly helped your cause by bringing those loan payments to a current status as quickly as you did.

While the short-term hit to your scores was no doubt a severe one – particularly for such a minor digression as one late payment – your task now is to ensure it remains an isolated incident in your credit history.

Doing so can lead to a relatively speedy recovery. However, “speedy” in this context can easily mean another year or two of good credit behavior: on-time payments, low card balances and very few new account openings.

That time frame could be shorter if you and your husband have very few accounts with a history of late payments, or longer if your credit reports contain a high proportion of problem accounts.

In the meantime, you may want to prepare for that future mortgage:

  • Lower any existing credit card debt to less than 10 percent utilization – the amount that will earn the most credit score points.
  • Build enough savings for the down payment and closing costs you will certainly need come home-buying time.

Here’s hoping that mortgage comes quicker than you think!

See related: Rebuilding credit? Go easy on new accounts, Late payments' recency, frequency, severity dictate score damage

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Updated: 04-22-2018