Keeping Score

Can my credit score recover from a late payment in time to close on a home?

How soon you recover from a late payment’s impact on your credit score depends on what else is in your credit report


The more positive data you have in your credit file, the quicker a late payment’s impact will dissipate. A thin file may take longer because more data and time are needed to make sure this was a one-off issue. Going forward, you must always pay on time and keep your card balances low.

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Dear Keeping Score,

My credit score was in good shape till one or two weeks ago – 705 points on Equifax and 740 on TransUnion. However, I had one late car payment and my score dropped 40 points!

I am hoping to close on a home with a FICO score goal of 720 points in six or seven months.

Assuming I keep all other payments the same and keep my credit utilization below 10%, can I recover my credit score back to 720 in seven months? Nader

Dear Nader,

Life may not be fair, but unfortunately, credit scores are! I can hear the frustration in your question, but since you missed a payment, you are statistically a more risky borrower than you were last month. Your question and your concern only underscore my oft-repeated maxim to pay on time, every time.

However, what is done is done and the only way to go now is forward. I’m hopeful that you can still get what you want.

Check out all the answers from our credit card experts.

Ask Steve a question.

The first thing to address is why your Equifax score was 35 points lower than your TransUnion. I suggest you compare both reports and look for differing data that may account for the discrepancy. Roughly 20% of consumers find errors in their credit reports, according to the Federal Trade Commission.

I also want you to pull your Experian report and get a score from them. Be sure to do the same comparison and dispute any out of date or erroneous negative information you may find. While it is true that each bureau does things a little differently, this difference seems a bit high and worth checking out.

In my book “Credit Repair Kit For Dummies,” I recommend that mortgage shoppers get and review all their credit reports at least six months in advance of applying for a loan. This will allow time to correct any errors and do some fine-tuning if needed.

You are entitled to free reports from each bureau every year at Normally I recommend getting one report every few months, but for a mortgage shopper, I’d get all three at once to see what each one has to say right now.

Once you have the reports, go over them with a fine-tooth comb, looking for any differences. If you find something that doesn’t look like it’s yours or is negative, be sure to investigate to be sure it is correct. Mistakes happen in credit reporting every day, and many times nothing will be changed unless the consumer takes action.

Just remember that true and accurate information cannot normally be removed from a report. Only the creditor who reports the late payment can reverse the entry. Since you very recently missed your payment date, it may be worth a call to the lender to ask them to reverse the negative entry just this one time. Sometimes explaining a hardship or some just plain groveling can make a difference. Lenders are people with real-life problems too.

See related:  Building a mortgage-worthy credit profile

How quickly your score recovers depends on your credit file

My ears perked up when you said you had scores from Equifax and TransUnion only. Some third-party sites offer a free version of credit scores from fewer than all three bureaus.

A VantageScore is a fine score, but it is not as widely used by lenders as FICO is. If you have a lender in mind for your mortgage, I would ask them if they use FICO or VantageScore. Then you can focus on tracking your score from whoever they use.

So, will six or seven months be enough time to regain the 20 to 40 points you need? It is hard to say with the information you have given me. While it certainly is possible, it will be more difficult if you have what is known as a thin file (one with little history).

The more positive data you have in your file the quicker a one-time hiccup will dissipate. A thin file may take longer because the scoring elves need more data and more time to make sure this was a one-off issue. Your intentions to be diligent about paying down your debt and paying your bills on time will certainly help.

You can goose the process a bit by paying any creditors who report to the bureaus more than just once a month. Making multiple payments to an account signals financial health to lenders and will keep your utilization as low as possible and your score as high as possible when a score is generated.

Let’s say you normally charge $2,000 a month on your favorite card. You pay the bill at the end of the month. A score pulled late in the month will show the full $2,000 owed and a higher utilization percentage and lower score.

Instead, pay $1,000 on the 15th and $1,000 on the 30th. This way a score generated during the month but after a payment is received will only see the $1,000 balance owed and a lower utilization percentage and thus a higher score.

See related:  Credit utilization rules for managing your credit score

Want to improve your score faster? Try these tools

You can also use some of the newer products available that can bring your score up. Experian Boost and UltraFICO are two such programs, but you need to know that only your Experian score will be affected. But since these are free programs it is worth trying them.

You can always opt out if you don’t like the result. Many mortgage lenders regularly pull all three reports to make their lending decision, so having a higher Experian score might work in your favor.

Both Experian Boost and UltraFICO require you to give the bureau access to your different financial and banking information. The Experian Boost program looks at things that are not normally reported on your credit report, like utility and cellphone payments. UltraFICO looks at the overall management of your bank accounts, with regards to spending and saving. In both cases, only positive information will be reported. And as I said, these are both free and you can opt out at any time.

Above all, you must be extra careful to do everything right when it comes to your finances over the next few months. Don’t open any new accounts, as this will generate a hard inquiry and lower your score in the near term, and pay those bills on time, every single time.

One last tip you can consider an early Christmas present: When you do your mortgage shopping, be sure to finish it within a 45-day period. If you do this, all the inquiries from all the lenders you shop will count as a single hard inquiry, which is far better for your credit score.

Remember to keep track of your score!

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Published: December 12, 2019

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Credit Card Rate Report Updated: January 22nd, 2020
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