The only thing easier than getting a great credit score is getting a really bad one. And the surest way to damage your credit score is to pay your bills late, or not at all.
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According to FICO data reported by Equifax, a 30-day delinquency could erase 90 to 110 points from a credit score of 780. Those with so-so credit -- a 680 score and two late payments -- might see their score drop by 60 to 80 points.
In either case, these kinds of credit issues can be devastating, resulting in denied mortgage or car loan applications, higher interest rates, larger down payments, or all of the above.
But not all late payments hurt your credit score
Credit scores are designed to determine the risk you will be late with regularity, or not pay at all. They aren't designed to determine how forgetful you are. On a long enough timeline, everyone will forget to make a payment on a bill. It happens. For this reason, payments that are late by fewer than 30 days are not reported to the credit bureaus.
Credit scoring algorithms categorize late payments in 30-day intervals, ranging from 30 days up to 120+ days. For obvious reasons, a 30-day delinquency is much less severe than a 90-day late payment, but any late payments should be avoided if possible. At 120 days late, bills are typically sent to collectors, which can turn one bad mark into two.
People who are proactive can generally avoid a 30-day delinquency on their credit report with three strategies, which we'll detail below. Have an existing late payment on your credit report? There are ways to get that removed, too. Here's what you need to know.
1. Double-check the grace period
You might think that 30 days is 30 days, but sometimes it can be 35 or even 40 days.
Policies vary from creditor to creditor. In some cases, borrowers have a grace period of five or even ten days before the 30-day clock starts. Thus, if your bill is due on the fifth day of a 30-day month, a five-day grace period might allow you to pay by the 10th of the next month without triggering a 30-day delinquency on your credit report.
The grace period should be confirmed with your lender. If possible, contact your lender through online customer support, so that you have a log of the conversation that you can keep for your own records. If the lender deviates from what they say, you can use the record of your conversation and payment history to dispute the 30-day late payment through a free service mandated by federal law, AnnualCreditReport.com. (Don't get duped -- AnnualCreditReport.com is the only truly free way to check your credit report.)
2. Change the due date
Banks can be pretty lenient with due dates, allowing their customers to move them by a few days or weeks upon request. This might give you just enough time to make a payment before crossing the 30-day threshold.
Again, this varies greatly by lender. Credit card companies are generally willing to move due dates, especially if your account isn't already past due. Moving a due date for a mortgage or car loan payment may be more difficult, however. If you're already late on your payments, lenders of any kind may be less willing to move it for you. This advice is more preventative medicine for your credit report than an elixir for accounts that are already past due, but it can help those who act before a potential problem occurs.
A late payment can start a devastating cycle of higher interest rates every time you borrow. Image source: Getty Images.
3. Transfer the balance
This tip comes with a caveat: It's only for people who are genuinely experiencing a short-term cash flow issue rather than a long-term financial hardship. People who are certain that they will not be able to pay their bills over the intermediate term would compound their credit issues by following the strategy below. It's better to be late on one account than it is to be late on two.
With that disclaimer out of the way, you can generally avoid a 30-day late payment by transferring a balance from one lender to another.
Some lenders allow borrowers to make payments on cars or mortgages by credit card, thus allowing you to effectively extend your payment for another 30-plus days until the credit card bill comes due. Virtually all service providers -- utilities, insurance, or other recurring billers -- offer payment by credit card, too. You can expect to pay a convenience fee (usually around 3% of the payment) for paying by card, but it's a small price to pay compared to a 30-day delinquency on your credit report.
Likewise, a due date on a credit card can be extended by transferring a balance from one card to another. In most cases, you'll pay a fee of $5 or 3% of the account balance to move a balance from one card to another. Only one card that I know of, Chase Slate, waives balance-transfer fees on qualifying balance transfers made within 60 days of account opening.
But whether you pay a fee or not, avoiding a 30-day late mark on your credit report is well worth the price of a balance transfer. Note that you don't need to move the whole balance, just an amount equal to, or greater than, your minimum monthly payment.
How to get rid of a 30-day delinquency
If you have a delinquency on your credit report that you'd like to get rid of, it may be time to write what's known as a "goodwill letter." This is a pretty straightforward affair: Write to the lender to ask that they remove the late payment or account from your credit report.
Law requires that banks report accurate information to credit bureaus, but that does not mean they are required to report complete information. Thus, lenders have discretion in what they report to the credit-rating agencies. A simple letter that explains your situation at the time of the delinquency may just get the bad mark removed from your credit report.
The key is to be friendly, not combative. Take responsibility for your delinquency, and ask for forgiveness. If you have an otherwise perfect payment history, mention it in your letter; it can only help you.
Offices of large financial institutions are staffed with people just like you and me, people who have been in the same situation. While success isn't guaranteed, it's worth the effort. The worst that happens is you waste 15 minutes and $0.49 on a stamp; the best case is you get an instantaneous boost to your credit score.
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