Do late payments affect credit rating and credit score?
Late and missed payments will likely impact your credit rating and credit score. It's a sign that shows lenders that you may not be able to be financially responsible to pay them back, and so is reflected to show them this in their credit score or rating. And it's not just money that you borrow, "even paying your utilities or phone bill late can affect your score too", says Richard.
We wanted to know how lenders would see late payments, and to what extent this would affect your credit rating and credit score. According to Richard, "Making a late payment just once or twice over a 12-month period won't be too harmful, but repeated late payments can be very harmful as creditors see this as a warning that you may be struggling to meet your current commitments, which could lead to your credit score being reduced."
Pauline reiterates this, suggesting the extent to which you are affected depends on who the person is, and where they are in their credit journey so far. As Pauline tells us: "A credit score considers a lot of different factors. Two people will be affected differently by missing a payment. If you only have a couple of years of credit history, a late payment will have a bigger impact than if you have a good credit history."
So, what should you do if you feel you may be in danger of missing a payment? Pauline suggests that the best approach is a hands-on one: "Be pro-active and approach your lender to discuss your options." Often, your lender will be able to extend your payment period or support you with a way that works for you both.