Oh the joys of Christmas shopping – either you’ve just begun or you’ve been finish for months now.
While there may be many distractions during the holiday season, it would not be wise to forsake your obligations to lenders just because you’re distracted. There are many external pressures in life but due dates are never to be forgotten and lenders simply don’t care about your excuses.
Great Myths of Credit Scoring
One of the myths of credit scoring is that minor late payments can’t hurt your score if you quickly credit your account. This may be true but only if your late payment is isolated and historical or in other words, if your account isn’t currently delinquent.
There are two categories of derogatory information; minor and major. Minor delinquencies include only historical 30 and 60-day delays. Major includes defaults, any record of being 90 days late or worse. This also includes repossessions, tax liens, judgments, collections, foreclosures, bankruptcy, settlements, and accounts that are currently delinquent.
Delinquency Vs. Major Derogatory Item
Using the FICO credit score estimation tool, the difference in scores between those who have never been delinquent on anything versus those who are currently delinquent varied between 35-50 points. By being currently delinquent, even just 30 or 60 days, you’re making the credit score’s job easy because you’re currently proving that you’re willing to be past due on credit obligations, thus the drastic score drop.
Here’s something else to keep in mind. If your credit report shows that you’re at least 30 days late, lenders are not permitted to report late payments to the credit bureaus until the borrower has gone a full 30 days past the due date. In other words, if you’re a week or two behind on your loan payments those won’t ever be reflected on your credit reports, although you’ll likely have to pay late fees.
What’s the bottom line? You may be thinking if I catch up on the payment and avoid going 90 days past (major derogatory) then my score will recover. This is true however, you’re score will never fully recover although it will bounce back quite nicely.
How have you avoided late payments? Leave us a comment below or on Facebook (click here)!