Between unexpected expenses and life getting busy, it’s not uncommon to be late making a payment here or there. However, being common does not mean that late payments have no impact on your credit score.
At Credit Repair Solicitors, we specialise in late payment removal, helping to get our client’s credit back on track. In this article, we’ll begin by exploring what a credit score is, how late payments impact your credit score, and what can be done to repair your creditworthiness if you’ve already fallen behind.
What is a Credit Score in Australia?
In Australia, a credit score is a numerical representation of a person’s creditworthiness, typically ranging from 0 to 1200. This score is calculated based on information found in your credit report, which includes your credit history, repayment behaviour, and other financial data. The higher your score, the more likely you are to be seen as a responsible borrower — thereby increasing your chances of securing loans and credit at favourable rates. In terms of how credit scores are calculated, you can thank reporting agencies such as Equifax, Experian, and illion.
How Do Late Payments Show Up on a Credit Report?
When you miss a payment on a loan, credit card, or utility bill, this ‘delinquency’ is recorded on your credit report. Creditors won’t usually report late payments to credit bureaus until they are at least 30 days past due. These late payments are classified into different categories based on how overdue they are. The longer the payment remains unpaid, the more negative the impact on your credit report.
In addition to late payments, if a debt remains unpaid for more than 60 days, it may be classified as a default on your credit report. A default can have long-lasting effects on your credit score, as it indicates that you may be a high-risk customer for future lenders.
How Do Late Payments Impact Your Credit Score?
Late payments can cause an immediate drop in your credit score, as well as long-term damage to your record and higher interest rates. See below for further explanation:
Immediate Drop in Score
Even a single late payment can cause a noticeable drop in your credit score. The extent of the dip depends on your previous credit history. If you have a high score, the decrease could be as much as 100 points, while if you already have middling credit the impact will be less.
Long-Term Damage
Multiple late payments over time can lead to more severe damage. Consistently missing payments can indicate to lenders that you are a high-risk borrower, making it difficult to obtain new credit.
Recorded for Years
Late payments, even if they were only 30 days late, can stay on your credit report for up to seven years. Paying for the late payment and associated fees may still not mean the delinquency is removed from your report. This long-lasting record can affect your ability to get loans, mortgages, and even rental agreements.
Higher Interest Rates
With a lower credit score, you may still obtain credit, but often at higher interest rates, resulting in more expensive borrowing costs.
Does a 7 Day Late Payment Affect Credit Score in Australia?
Generally, a 7 day late payment will not affect your credit score in Australia, as a late payment will only be reported if it’s overdue by 14 days or more. The debt should also be a minimum of $150, and must be formally notified of the overdue payment for it to be valid.
Can You Recover from Late Payments on a Credit Report?
You can recover from late payments on your credit report by paying off your debts, creating a payment plan, and regularly checking your report for inaccuracies. For more detail, check out our step-by-step guide:
- Pay Off Debts: Start by paying off any outstanding debts as soon as possible. This will stop further negative reporting.
- Create a Payment Plan: Set up automatic payments or reminders to ensure that future payments are made on time.
- Check Your Credit Report: Regularly review your credit report for any inaccuracies. If you find errors, dispute them with the credit reporting agency.
- Seek Professional Help: Engage a credit repair specialist to help navigate the complexities of credit report issues.
Will Your Credit Score Go Up After Paying Late Payments?
Yes, your credit score can improve after paying late payments, but the process isn’t immediate and the late payment record will still remain on your credit report. In the short-term, paying a late payment stops the negative impact from growing worse, but that late payment will remain on your credit report for up to 7 years. Fortunately, establishing a pattern of on-time payments will help to rebuild your score in the long-term.
How Do I Remove a Late Payment from My Credit Score?
To remove a late payment from your credit score, you can request late payment forgiveness, negotiate with the creditor, or file a formal dispute with credit reporting agencies. Additionally, if you suspect the late payment might be an error, you can check by carefully reviewing your credit report.
How to Ask for Late Payment Forgiveness?
You can ask for late payment forgiveness by contacting your creditor and writing a goodwill letter, which will explain your situation and describe the steps you’ll take to avoid late payments in the future. To increase your chances of success, we encourage you to gather all the relevant information, including your account details, the date of the late payment, and anything indicating a history of on-time payments. Remember to be polite, professional, and honest.
How Credit Repair Solicitors Can Help
At Credit Repair Solicitors, we understand the stress and challenges that come with managing a damaged credit score. As experts in credit repair, we offer comprehensive services to help clear and amend adverse repayment history. Our team works diligently to remove inaccuracies, negotiate with creditors, and make sure that your credit report reflects your true financial standing.
Our services include:
- Default on Credit Report Resolution: We work to address and resolve any defaults listed on your credit report, aiming to restore your creditworthiness.
- Late Payment Removal: By negotiating with creditors and credit bureaus, we strive to remove unjust late payment entries that negatively affect your credit score. You would be surprised how often creditors make procedural or legislative errors, which make it even easier for our specialists to negotiate removal.
- Expert Guidance: Our credit repair specialists provide personalised advice and strategies to help you maintain a healthy credit score in the future.
Contact Us Today
Don’t let late payments hinder your financial future. Contact Credit Repair Solicitors today to start your journey towards a better credit score and greater financial freedom.