Editorial Policy

Relax, One Late Payment Won't Wreck Your Credit Score

Erica Sandberg

October 20, 2011

QDear Erica,
What can I do to repair the credit damage that just happened? My credit score dropped nearly 100 points because I forgot to pay a Sears bill. I only owed $15 and they are reporting me as 30 days late, even though I got back on track right away. So now what do I do?

My credit was perfect before. I have two mortgages, one home to live in and one that I rent out. I am concerned because I want to buy a third house as another rental. I am disgusted by the damage this little incident caused to my score. Th_incredible-shrinking-fico-score

I am fully aware that credit repair companies “don’t do anything for consumers that consumers cannot do for themselves at little or no cost” but I don’t have the time to deal with it, and I do have the money to give someone else who does. What should I do now? Thanks. — Joshua

ADear Joshua,
Cause and effect, Joshua. Cause and effect.

You skipped a payment cycle and got dinged. Sears probably charged you a late fee, your credit report is now reflecting the late payment and your credit score dropped by some points. So what can you do? Learn from it.

First, let me assure you that the 30-day late payment that is being reported on your three consumer credit files (TransUnion, Experian and Equifax) is not the end of the world. It’s not great, but one isolated incident isn’t ruining your formerly “perfect” credit rating.

Presuming you have kept up a righteous payment pattern for years and knowing that the amount you owed to the department store was trivial, this one little personal banking error won’t be held against you for long. Ask Erica

As you said, you’re now back in control. So long as you pay that account and the rest of your obligations on time and in full, the black mark will soon fade to a pale shade of gray.

Yes, it will remain on your credit report for up to seven years, but the impact will be less profound as time marches on.

And your FICO score? Well, that should bounce back within six or so months. To escalate the healing process, just keep using your credit card in a positive way. Hopefully, you can wait that long to purchase your third piece of property until the numbers bounce back to their original glory.

Now, I’m getting the impression that you’d rather have the notification just removed from your credit reports, but I’m afraid that you cannot do that, either on your own or by contracting out with a company that helps people with credit recovery. You see, it happened — you did pay late. You can’t dispute the truth, at least not legally on a credit report.

Why not? Because the only reason these reports are worth anything to companies such as mortgage lenders is that they reflect a consumer’s true borrowing and repaying history.

With that information, they can make objective business decisions: should they lend you money, and if so, what the terms and interest rate should be. If it’s incorrect, whether due to genuine mistakes or if you’ve had correct information purged, they are unable to do their job.

Also, a word about credit repair companies: In general, I do believe it’s best to clear up errors on your own.

You can dispute inaccuracies on a credit bureau’s website, and you only need to contact one, as they will notify the others. It’s usually fairly quick and simple.

However, if you have a particularly thorny issue, and you want to hire out, I’m not 100 percent against it — if the business is aboveboard and is well-priced. Oh, and as long as what you’re disputing is old or false — which yours is neither.