When lots of bills are due around the same time, it can be difficult to pay them all. And it may be tempting to skip one. There are usually late fees, though it might seem worth it to pay a late fee to buy yourself more time
Let’s look at how it might affect your credit score.
What’s in a credit score
The full breakdown of your credit score is made of:
- Payment history (35%). Whether you pay your bills on time or not is the single biggest factor for your credit score.
- Amounts owed (30%). It’s good to keep your credit utilization low, which is your balance compared to your overall available credit.
- Length of credit history (15%). The longer you’ve had your accounts open, the better your score will be.
- Credit mix (10%). The more diverse your accounts, the better. This means a mix of credit sources like credit cards, auto loans, student loans, mortgages, etc.
- New credit (10%). If you seek a lot of new credit in a short amount of time, your score can take a hit. This is usually temporary, and your score will recover the longer your accounts stay open.
These components make up your FICO® score. FICO® scores were created ~30 years ago by the Fair Isaac Corporation to provide an industry standard for scoring and lending purposes. To this day, it’s still widely used by over 90% of lenders to make lending decisions. When someone refers to their credit score, they most often mean their FICO® score.
Credit score impact when you skip a bill payment
In general, missing any bill payment can have a detrimental effect on your credit score. That’s because 35% of your overall credit score is based on your on-time payment history. Skipping even one payment can have negative consequences to your credit score.
Most payments are considered late after 30 days, including:
- Credit card payments
- Utility payments
- Auto loan payments
- Cell phone payments
- Student loan payments
Plus, when you’re ready to get caught up, you’ll usually have to make two months of payments (or however many months you missed plus the current month) to get caught up, plus any late fees and accrued interest. That can make getting your accounts current even more difficult.
Negative credit information can have a greater impact than positive information
It may seem unfair, but negative marks on your credit report can last years, depending on how late your payments were. Even if you’ve made your payments on-time for years, one blemish on your credit report can lower your score substantially. Something simple like seeking new credit stays on your report for at least a year, while more serious delinquencies can stick around for 7 years or more.
It’s best to make timely payments and to never skip paying a bill if you can help it.
What should you do if missing a payment is inevitable?
If there’s no way to avoid missing a payment, reach out to your lender. Oftentimes, you can explain your situation and get an extension. Some may even waive your late fees if you’re having a hard month.
Other companies, like those who service mortgages and student loans, may have hardship departments with staff who will work out a payment plan with you and let you miss one payment or pay a lower amount for a little while. Because, ultimately, the lender would rather get paid than not.
The worst thing you can do is stay quiet and miss payments. While it might be hard to reach out and ask for help, it can be the best thing for your long-term credit score.
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Skip a bill payment bottom line
It’s easy to miss a monthly payment, and hard for your credit score to recover. 35% of your FICO® score is your payment history, which also carries the most weight of any credit factor.
If you need to skip a bill payment, the best plan is to reach out directly to your lender. Oftentimes, they can extend your due date, waive a late fee, and work out a repayment plan before negative information appears on your credit report.