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What a Late Payment Can Do to a Credit Score

A good credit score is important for more reasons than just obtaining new credit. These days, it can factor into everything from landing a new job to getting the best deal on your insurance policies. It’s more important than ever to avoid late payments on your mortgage!

A 100 point drop for one late mortgage payment? It’s true. A single, 30-day-late mortgage payment can cause your score to drop. Credit scoring algorithms vary based on many factors, and in some instances, the damage may be even greater and last for years.

The costs accumulate. A single missed payment will cost you not only a late fee, but the expense really adds up on your next loan or missed opportunity. Low credit scores typically mean a higher rate and cost. Higher rates can mean hundreds of thousands of dollars of extra expense over the life of a loan. Missed payments are usually unplanned. Usually, events beyond our control lead to late payments, such as an accident, illness, job loss or family issue. Carelessness or a hectic life may also result in a forgotten payment.

What can you do?
  • Plan for the unexpected. Maintain an emergency cash reserve account equal to at least 3 months of living expenses or more.
  • If you’re prone to forgetting or don’t have a scheduled time to sit down and pay bills, set up auto payments through your checking account or put a perpetual reminder on your calendar.
  • Little other than time will decrease the negative impact of a late payment, so prevention is the one sure remedy. If you don’t already have a good system in place to assure timely payments and are not sure what’s best, reach out anytime.

If you have questions about managing your credit, contact your Fidelity Bank Loan Officer.