How quickly can credit be hurt and how quickly can it be fixed? Is it equal? If one month you forgot to pay, but the next month you paid, does everything even out? As you can probably tell, this happened to me. I totally forgot about my Visa because it was only $36 and drama was breaking out with my family. I always pay my bills off right away, so this is unlike me. When I remembered, I paid them immediately but am scared that I ruined my credit. What can I do to fix things now? –Jules
I would tell you not to worry, but I'm actually glad that you are so concerned. It means that you take your money and credit seriously. Clearly, you want to preserve all the fine work that you've done so far, and you understand the value of credit reports and scores.
And now to soothe you: Your credit reports are probably fine. Check them now by going to annualcreditreport.com. If you sent the card payment before a full cycle had lapsed (about 30 days from the due date), you'll see that the credit card company most likely did not notify the three credit bureaus that you were late.
Instead, they may have just added a late fee to your balance. Because you aren't a habitual payment scofflaw, the penalty is limited to $25. You may even be able to get around that charge. Explain to your credit card company what happened, while also pointing out that you've always paid on time. Then ask that they drop the charge. Chances are they will.
If you skipped an entire payment cycle before getting the payment in, the credit card company will have notified the credit bureaus. Your reports will indicate that you were 30 days delinquent.
How bad is such a notation? It's not great, but it's certainly not tragic either. The late payment will be factored into your credit scores, and the most common one — the FICO — rates payment history as its weightiest category. Your numbers will dip because of the notation, but if you have years of perfect payments prior to that, it shouldn't be too dramatic a change. If you want to see what it did to your points, get your scores from myFICO.com.
Although evidence that you paid late will be on your credit reports for seven years, it will lose importance as time passes. To offset the more major damage that occurs while it's young, use your credit card again. Charge regularly, but pay in full and before the due date, just as you had been doing. Soon that ding will hardly impact your rating. In fact, after about six months of consistent borrowing and repaying, your scores should bounce back to what they were before this little glitch.
Clearly managing credit is easier than keeping loved ones in line. So you can concentrate on your human relationships without disrupting your finances, set up an automatic payment system with your credit issuer. This way, payments will be made without delay, no matter what interpersonal riots are roiling.
Got a question for Erica? Send her an email.