Can Credit Repair Remove Late Payments?

Bills can be a lot to deal with, especially for those dealing with financial hardship. Some people may not be able to handle their payments on time every month. Not handling payments on time can result in late payments on your credit report. These late payments can mean some bad news for your credit score. However, your situation may not be as hopeless as you think.

Understanding Your Credit Score

It is important to have a better understanding of your credit score when dealing with late payments. Your credit score is a number that reflects the information from your credit report. Lenders will use your credit score as a way to better understand you as a borrower. This helps them assess risks that they may face if you borrow money.

What is Your Credit Report?

Knowing your credit report can help you better understand your credit score. Credit bureaus (also known as credit reporting agencies) will collect and store information from creditors like lenders, credit card companies, etc. A majority of people will have more than one credit report. Creditors don’t have to report to every credit bureau which is why many people only consider the popular ones. There are three major credit bureaus which are Experian, Transunion, and Equifax.

Your credit report will contain a variety of information like your:

  • Current Name
  • Past Names (If Any)
  • Current Address
  • Past Addresses
  • Birthday Information
  • Social Security Number
  • Contact Information
  • Current Credit Account Information
  • Past Credit Account Information
  • Credit Limit
  • Account Balance
  • Relevant Payment History
  • Liens
  • Foreclosures
  • Bankruptcies
  • Overdue Payments
  • Civil Suits
  • Judgements
  • Inquiries

These comprehensive reports have a lot of information! How the information on your credit report will impact your credit score varies by credit bureau. Credit bureaus have their own scoring models so this means that it will be different depending on where you go.

What Factors Impact Your Credit Score?

There are five main factors that impact your credit score. It is also important to keep in mind that scoring models vary by credit bureau. However, the percentages below are in regard to the FICO scoring model:

  • Payment History (35%)
  • Credit Utilization Ratio (30%)
  • Credit History (15%)
  • Variety of Accounts (10%)
  • Hard Inquiries (10%)

Payment History

This factor is what impacts about 35% of your credit score. This can show lenders how you consistently deal with payments and how reliable you are. Late payments and missed payments can negatively impact your score since payment history is such an important determination factor.

Credit Utilization Ratio

Even though your credit utilization ratio doesn’t impact your credit the most, it isn’t far behind at 30%. Your credit utilization ratio (a.k.a your debt-to-limit ratio) looks at your total available credit compared to what you use. A good rule of thumb is to keep your utilization ratio below 30%. For example, if you have $2,000 worth of available credit between 3 cards then you should spend no more than $600 at most between those 3 cards. This will help you reduce any negative impact that a high balance could have.

Credit History

Your credit history takes into consideration many factors of your credit. It makes up 15% of your credit score. A part of your credit history will look at your average age. Your average age looks at your oldest account, your newest account, and everything in between. Your credit history also takes into consideration factors like how often you use your card, closed accounts, etc.

Variety of Accounts

This credit factor only impacts 10% of your credit score. Just like an investment portfolio, you can benefit from some diversity. There are two main categories that you can diversify in:

  • Revolving Credit
  • Installment Loans

Revolving credit refers to products like a credit card, a home equity line of credit, etc. On the other hand, installment loans refer to loans with fixed payments over a specified timeline.

Hard Inquiries

There are two types of inquiries. There are soft inquiries and hard inquiries. While soft inquiries will not have any impact on your credit score, hard inquiries will impact your credit score by 10%. Hard inquiries require a signature from the borrower since lenders need permission to access this information. Hard inquiries usually have a negative impact on your score by up to 5 points and only last for two years until they fall off.

Understanding Late Payments

Now that you have a better idea of your credit score, let’s get a little bit more in-depth about late payments. Late payments are a part of your payment history which impacts 35%  of your credit score. Late payments are defined as an amount of money that the borrower sends to the creditor after the due date and grace period has passed. These late payments are no laughing matter and can have consequences like:

  • Fees
  • Extra Interest
  • Termination of the Account
  • Showing Up on Your Credit Report

Lenders aren’t as strict as you may think. Generally payments that are less than 30 days late don’t show up on your credit report unless they happen a lot. Depending on the type of late payment, they can stay on your credit report for up to seven years. Their negative impact will decrease over time until they eventually fall off. They are usually categorized on a credit report depending on how late they are. Categories are generally 30 days, 60 days, 90 days, 120 days, and 150 days.

How Much Does a Late Payment Hurt Your Credit?

The amount of impact a late payment will have on your credit varies based on a bunch of factors. If you have a spotless payment history on your credit report but miss a payment that’s over 30 days past due then you could see a decrease by 100 points. Luckily, if you already have a lower score then the impact won’t be as severe but it will still be there.

Will Making a Partial Payment Help You Avoid a Late Payment?

Sometimes something is better than nothing. However, not when it comes to your late payments getting reported to the credit bureaus. Partial payments will not help you avoid the late payment on your credit report. For example, if your minimum payment due by your credit card issuer is $50 but you can only make $35, the payment will still be considered late. If you can’t make the minimum payment then you should talk  to your lender. They may be more understanding than you realize.

How to Avoid Late Payments?

There are ways that you can avoid a late payment that may be able to help:

  • Select Your Due Dates
  • Set Up Alerts
  • Use Automatic Payments
  • Pay the Bill Throughout the Month

Select Your Due Dates

Lenders often provide flexibility when it comes to due dates. A majority of lenders offer the opportunity for consumers to pick when their due date is. For example, if your due date from your credit card issuer is normally on the 27th but you get paid the 1st, then you may want to reschedule it to be closer to your payday. This can help you avoid a late payment.

Set Up Alerts

Think of your alarm clock. Your alarm clock alerts you in the morning to wake up. You can set up alerts around when your bills are due. Making sure you are reminded to make payments can help you stay on track before they become late payments.

Use Automatic Payments

If you just forget to make the payments then it is important to set up automatic payments. These payments will be automatically withdrawn from your account to go towards the bill that you owe. You can keep track of your automatic payments by writing them down in a calendar so that you can just make sure the automatic payment was taken out of your account. Automatic payments can seriously help you reduce your late payments!

Pay the Bill Throughout the Month

Let’s say that your phone bill for the month is $100. Instead of paying a one time payment by the due date (which if missed can result in a late payment), you can pay the amount over the course of the month. If you get paid weekly then you could take $25 out of your paycheck every week to go towards your bill. By the time your due date arrives, your whole payment should be taken care of!

How to Remove a Late Payment from Your Credit Report?

If you have a late payment on your credit report, then there may be ways to remove it! People that want to remove late payments on their report can try a:

  • Goodwill Adjustment Letter
  • Pay for Delete Letter
  • File a Dispute
  • Use a Credit Repair Company
  • Just Wait

Goodwill Adjustment Letter

If you have a good credit history and good relationship with your creditor then you may be able to get a goodwill adjustment for the late payment. Even if you don’t have a great history and/or good relationship with your lender then you can still try to get a goodwill adjustment! You just may not get approved.

If you want to submit a goodwill adjustment letter you will need to write one that explains the late payment and asks for forgiveness. You can also reassure them that the late payment will not happen again and that you learned from your mistake. If they agree to the adjustment then they will update your credit file accordingly.

The worst they can say is no! If they do say yes make sure you have written confirmation of their adjustment.  This will be supportive documentation that you can use if you don’t see the late payment removed from your credit report.

Pay for Delete Letter

You can also try sending a pay for delete letter. Within this letter you will want to offer debt repayment in exchange for the removal of the late payment from your credit report. You will want to outline what you are offering and what you expect in exchange. The creditor may not accept this but the worst they can say is no.

File a Dispute

If you have reason to believe that the late payment on your credit report is an error then you can file a dispute. Generally people submit disputes with one of the three major credit bureaus. You will want to begin the process by writing a letter that contains proof of the inaccuracy and why you believe it’s wrong.

Once the credit bureau receives the dispute letter they will need to respond within 30 days, but if there is any follow up within that  timeframe then they will have an extra 15 days to respond.

If they find your dispute incorrect then the late payment will stay on your credit report. If your dispute is accurate, then you will see the late payment removed from your credit report!

The reason that credit bureaus will remove the inaccurate negative mark is due to the protections from the Fair Credit Reporting Act (FCRA). This act ensures that credit bureaus only report accurate information.

Use a Credit Repair Company

Sometimes you may have so many late payments on your credit report that you feel like you can’t dispute them all. That is when you may benefit from using a credit repair company. These companies help consumers for a fee by reviewing their credit report and disputing any inaccuracies. A credit repair company can do everything that an individual can do. However, they advertise their services as a way to save time and effort for the consumer since they have the knowledge and experience to handle the dispute process of a late payment properly.

Just Wait

If all else fails, then you are left having to just wait. The late payment will decrease in impact over time until it eventually falls off after 7 years. If you tried sending letters and disputing the claim with no luck then waiting will be your next best bet.

Commonly Asked Questions

Handling late payments on your credit report can lead to a lot of questions. You’re not alone! Others have had questions along the way that you may have too.

Can Credit Repair Companies Remove Late Payments?

It depends. If the late payment is inaccurate or unverifiable then yes they can. However, if you have a legit, verifiable late payment on your credit report then they won’t be able to help too much. They don’t have super powers and all they do is dispute late payments on your credit report.

Should You Hire a Credit Repair Company?

Whether or not you should hire a credit repair company depends on factors like your financial situation, your abilities, etc. You can easily dispute late payments on your credit report yourself for free. If you want to save time and effort (while spending money) then you may benefit from using a credit repair company. Just make sure the company you use is legit!

What is the Consumer Financial Protection Bureau (CFPB)?

When researching information about late payments you may have come across the Consumer Financial Protection Bureau (CFPB). This agency oversees financial services and products that consumers can use. As a regulatory agency, they are responsible for making and enforcing rules that protect consumers. They also aim to educate people about different financial products and services that are available to the public.

How Many Credit Bureaus Exist?

There are countless credit bureaus that exist. However, your main focus should be on the three major ones which are Equifax, Transunion, and Experian. Each of these credit bureaus will have their own version of your credit report so you may see some differences in how late payments impact your score.

What is a Credit Counseling Agency?

Another agency that may be able to help you manage your credit is a credit counseling agency. These agencies aim to help consumers better understand and manage their credit through education. They can advise you on your financial situation and help you be more equipped to deal with your finances. They may also be able to help if you have any questions on what late payments mean in terms of your credit as well!

Are Credit Card Companies Responsible for Credit Reporting?

Partially. Credit card companies will keep track of your payments as a borrower. If you miss a payment, they will report it to the credit bureaus. While they aren’t responsible for credit reporting per say, the information that they provide to credit reporting agencies do impact your credit report.

Overall

A late payment can be stressful to deal with. While no one wants to deal with a late payment in the first place, your situation may not be as hopeless as it feels. Late payments are a part of your payment history which impact 35% of your credit score (based on the FICO scoring model).

If you miss a payment, that late payment may be reported on your credit report which will in turn impact your credit score. How much the late payment will impact your credit score varies on factors like how late the payment is, how many late payments are on your credit report, etc.

If you do have a late payment on your credit report, you aren’t necessarily out of luck. There are some strategies that you can try that may be able to remove the late payment from your account like writing a specific letter or disputing the mark. Worst case scenario is you just have to wait until the late payment falls off after 7 years. No one likes dealing with late payments. However, you may be able to bounce back from one faster than you realize!

Article References

https://www.upgrade.com/credit-health/insights/complete-guide-to-credit-scores/

https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-report-en-309/

https://www.wellsfargo.com/financial-education/credit-management/calculate-credit-score/

https://www.bankrate.com/glossary/l/late-payment/

https://www.nerdwallet.com/article/finance/late-bill-payment-reported

https://www.lexingtonlaw.com/education/how-to-remove-late-payments

https://www.debt.com/credit-repair/law/

https://www.investopedia.com/terms/c/consumer-financial-protection-bureau-cfpb.asp

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