How does a late payment affect your credit score?

Late or missed payments can sneak up on the best of us. Life happens and it’s not as uncommon as you may think to discover a slip-up has occurred. 

Understanding how late payments on credit reports can affect your score (and your creditworthiness) is crucial for maintaining a healthy financial resilience. If (or when) it happens, how long do late payments stay on credit reports for and is there a way of removing them? We’re covering it all in this blog so let’s get into it.

Does a late payment affect your credit score?

The short answer is yes, missed or late payments can have an affect on your credit report and make your score drop. Your payment history is one of the key things lenders consider when assessing whether or not to lend to you. So, if you have a credit history that shows you’ve missed payments then lenders could see you as “higher risk” to lend money to.

What about one late payment on your credit report? Can that hurt it? Yes, unfortunately. If you miss a payment with a lender — for instance, your phone contract — you will need to have rectified the late payment before the supplier reports your data to the credit reference agencies they work with.

The credit reference agencies (CRAs) are the organisations which file your credit history and calculate your score based on your reports. You can find out more about the UK’s top three (Experian, Equifax and TransUnion) here. 

It’s true that single late payments are often considered to be minor infringements but they do get flagged and could result in lenders viewing you as unreliable with credit.

If you miss a payment, you don’t necessarily have to panic. It’s not all bad news. If your late payment is a total one-off and you keep up with your regular payments moving forward, your score can absolutely recover. From that point on, it’s important to focus on rebuilding evidence of making every payment afterwards and to keep everything else in line and up to date.

However, if you keep missing your payments, it could lead to a more serious issue like a “default” (where a lender might decide to close down your account because you've missed too many payments) or a County Court Judgment (CCJ) appearing on your file. Either way, missing your payments or making them late can always incur charges, penalty fees and increases in interest rates.

What could be considered a late payment?

When you take out a credit agreement, you will usually organise a monthly repayment plan with the lender. These payments are part of the agreement you make to repay money that you borrow. 

If you don’t meet these obligations in full and on time, it’s known as a missed or late payment. 

But what if life pulls the rug from underneath you one month or some money crisis crashes your finances?

The good news is that a payment isn’t considered “late” if it’s made within 30 days of the agreed date. However, all agreements with lenders differ and late payments made inside a 30-day window can still sometimes have an impact or incur fees and charges. Make sure you check the details of any agreements that you’ve made with lenders so you know what might be on the cards if you’re late. 

If you notice you’ve fallen behind with a payment — get in touch with the lender as soon as possible. Make the payment as soon as you can, hopefully before it gets reported to the CRAs. The lender may also be able to help you rearrange the payment date to a more suitable day of the month for you (like just after payday or whenever your source of income arrives in your bank account).

How long do late payments stay on credit reports?

If a late payment becomes a missed payment and is reported to the CRAs, it can stay on your file for six years. This means that even a single late payment can have a lasting impact on your creditworthiness. But remember the impact of the missed payment marker on your report lessens over time. So if it’s a one-off, and you make future payments on time, then you can recover and lenders will start to use evidence in your more recent financial behaviour in their decision-making.

Removing late payments from credit reports

Disputing late payments on your report or trying to get them removed can be challenging, but it's not impossible. If there’s a good reason for your late payment, for example if you have been made redundant or there was an unforeseeable medical issue, you can ask Experian, Equifax and TransUnion to add a “notice of correction” on your report to explain what happened.

‍If you believe a late payment has been reported in error, you can also dispute it with the lender and CRAs. To do so you will need to provide any supporting documentation or evidence that proves the late payment was a mistake. The lender will then investigate your claim and if they agree they can ask the agency to remove the missed payment marker from your report altogether.

Does paying bills late affect credit?

Your utility bills don’t generally affect your history unless you are consistently missing your payments, in which case, the provider may report the unpaid or late payments to the CRAs. Bills specifically for credit are different though. For example, missed or late credit card payments can affect your report, as they directly relate to your management of credit. Not to mention that you may be less likely to be offered a credit limit increase (which also helps to strengthen your history).

Does a failed Direct Debit affect your credit rating?

Yes, a failed Direct Debit can indirectly affect your rating if a payment isn’t made as a result of insufficient funds. If whatever is impacting your Direct Debit isn’t fixed, it could lead to a late payment if not dealt with promptly. 

Always make sure there’s enough money in your bank or building society account before a payment is due, and fix any problems that could affect your Direct Debits as quickly as possible.

Do late mortgage payments affect credit reports?

A late mortgage payment can significantly impact your credit score since your mortgage is likely to be one of the most substantial financial commitments you have. 

Late payments on mortgages can affect your ability to get good interest rates and credit in the future. So it’s important to prioritise your mortgage payments to maintain a positive credit history — but also to support your financial wellbeing. 

Dealing with the stress of falling behind with your mortgage payments (and the risk of losing your home) will be far worse if you don’t reach out to your lender to talk to them about your situation. They will have a specialist team to talk to, but if you’d like to, you can also speak to the debt charity StepChange who offer expert debt advice for free.

Although not everyone can, if you do have a spare room in your property, there is also the option of getting a lodger in to earn some extra money to have savings for falling behind on your payments. You’re entitled to £7,500 in tax-free earnings from having a lodger under the ‘Rent a Room’ scheme  (as it stands in 2023-2024). That works out at £625 per month in rent, but there are conditions to this type of agreement and it’s best to read through the government’s helpsheet before deciding if it’s right for you.

How to avoid late payments on your credit report?

OK, you get it. Late payments aren’t a good thing to have showing on your history. So what can you do to avoid them? Here are some tips and tricks to help you make sure you don’t get missed or late payments on your credit report:

Take a look at any credit you have set up

What are your agreed payment dates and amounts? What grace periods do the lenders offer (if any)? Get your head around what is being asked of you and set up Direct Debits and automate your monthly payments to come out on payday. Prioritise your payment obligations before you even have a chance to see the cash so there’s no temptations to go out and spend it. It’s okay, we’ve all done it.

An emergency fund 

This is useful to cover any issues you have while paying back money you owe on short notice. If something unexpected hits one month, you can dip into your savings to avoid any fees and charges or negative flags on your account.

Consider if you can afford it, first

Be honest and realistic about your ability to stick to your repayment plan, and don’t apply for credit you can’t really afford to pay back. 

My credit score has been affected by late payments. What can I do?

If you’re concerned that a late payment may have already affected your credit scores, you can check them and your credit reports for free, as often as you’d like to, without hurting them, using these free services:

• ClearScore (uses Equifax data)
• Credit Club (uses Experian data)
• Credit Karma (uses TransUnion data)

Although there isn’t an overnight fix for missed or late payments appearing on your report, you can channel your focus on building a history of positive credit use from now. A Loqbox membership could be a good alternative to building your credit history with our clever credit-building tools.

Improvements to your credit score are not guaranteed. Missing payments to Loqbox or other credit accounts may harm your score.