Even if they don't lead to foreclosure, missed mortgage payments can devastate your credit score. One missed payment may diminish your score by less than 100 points, but it remains on your credit for seven years. Your score takes an additional beating when you miss more than one payment in a short amount of time. You must catch up within one month to keep banks from reporting a late mortgage payment to credit bureaus.
Running A Bit Behind
It's okay to send in a late payment, as long as it gets to your lender before you hit the 30-day past-due mark. Lenders usually give you a grace period of about two weeks after the due date. After the 15th, or so, of the month, however, it assesses a late penalty which usually equals about 5 percent of the mortgage payment. The exact late payment fee can vary by state and lender. At this point, you're on your lender's radar and may even begin to receive letters and calls requesting immediate payment. While this collection effort may be scary and annoying, your lender won't report you to the credit bureaus until you are at least 30 days behind.
When It Really Matters
Getting your payment in before the 30-day-late payment deadline is a must in order to protect your credit record. For example, most mortgage payment coupons state that payment is due on the first of each month. As such, you must get your payment in to the lender before the first day of the following month to prevent your lender from reporting a 30-day delinquency. Whether arriving by electronic or wire transfer, automated payment or by mail, the lender must receive the payment before the 30th day. Lenders report new information, such as a 30-day late payment, once every month.
Treading Muddy Waters
Lenders can muddy the waters by reporting a late payment even if they receive it within 30 days after it's due. That's because lenders often report payments as late if they fail to receive the money on or before the final business day of the month, Lending Tree says. You might end up with a late payment reporting if you remit payment within 30 days but the month ends on a Saturday or Sunday, or if you pay at the end of February, which has fewer than 30 days. Although a late February payment can shave several days off of the typical 30-day deadline, months with 31 days can buy you an additional day. A late payment received on the 31st "probably wouldn't be reported as late," Lending Tree says.
That Was Fast
Lenders report delinquencies monthly and credit bureaus follow suit by adjusting your scores immediately afterward. As such, you can start seeing the negative effects of the late payment within two months. You can also expect an initially lower score, which improves with time and on-time payments. You may even experience negative reactions from other creditors. They may reduce your credit limits, stop extending your limits and rescind recent offers for credit as the result of a missed mortgage payment.
- Lending Tree: When Is Your Mortgage Payment Late?
- Experian: Impact of Missing One Mortgage Payment
- Consumer Financial Protection Bureau (CFPB). "How Long Does Negative Information Remain on My Credit Report?" Accessed Dec. 10, 2019.
- Equifax. "When Does a Late Credit Card Payment Show Up on Credit Reports?" Accessed Dec. 10, 2019.
- Consumer Financial Protection Bureau (CFPB). "Does My History of Paying Utility Bills, Like Telephone, Cable, Electricity, or Water, Go in My Credit Report?" Accessed Dec. 10, 2019.
- Consumer Financial Protection Bureau (CFPB). "The Card Issuer Increased My Interest Rate on My Existing Balance. Can They Do That?" Accessed Dec. 10, 2019.
- Capital One. "Credit Card Charge-Off." Accessed Dec. 10, 2019.
- MyFICO. "Payment History." Accessed Dec. 10, 2019.
- Federal Trade Commission Consumer Information. "Disputing Credit Card Charges." Accessed Dec. 10, 2019.
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.