Credit Reports and Scores
- Your credit reports are records of your history of requesting and using credit, as well as paying back what you owe. Your creditors send this information to credit bureaus who then compile it into a report. Your credit score is a three-digit number that reflects the information in your credit reports. Banks, credit card companies, employers, landlords and insurance companies look at both your credit score and credit report when making decisions about giving you a job, renting you a home, setting your insurance premiums, or lending you money.
- Creditors can report late payments to the credit bureaus, which stay on the report for up to seven years after the late payment occurs. Your credit report will also show the length of the delinquency, usually by listing the late payments as 30 days, 60 days or 90 days past due. The older the negative item on your credit report, the less impact it has on your score.
- If you have a good payment record, one 30-day late payment probably won't affect your credit score too much. But a 90-day late payment can have a very serious effect on your credit score, as will a pattern of late payments.
- Your creditors monitor your credit report. If a creditor notices that you've missed a payment on one account, it may decide to reevaluate your credit terms. For example, it might reduce your credit limit or raise your interest rate. A higher interest rate can cost you a lot of money and make it more difficult for you to eliminate your debt. A lower credit limit reduces your available credit. Since your use of available credit makes up 35 percent of your credit score, that reduced credit line can do some significant damage.
- If you can't make the minimum payment, call your creditor. Explain your situation and ask for some extra time to get your payment in. If the problem is that you regularly forget to make payments, ask your bank about automatic bill pay options, or ask your creditor if it can send you an e-mail alert reminding you to pay your bill. Some creditors will remove a late payment from your credit report upon request if you have a good history of on-time payments.