• Severity of Late Payments

    Severity of Late Payments

    January 23, 2009

    As your payment history is 35% of your FICO score, negative factors such as delinquencies and late payments are a major point of review.  How long you took to pay a delinquent account is known as severity.  It is usually classed as 30, 60, 90, 120 days late, but could also include collections, repos, foreclosures, tax liens, and bankruptcy.

    The longer the time of a late payment the larger negative effect it carries.

    • 30 Days Late – Being 30 days late is hurtful when your are reported as being currently late.  If paid their weight is not large, but will grow if you consistently make late payments.  A pattern forms painting a picture of a person who pays late.
    • 60 Days Late – 60 days late has the same effect that as being 30 days late.
    • 90 Days Late – Being 90 days late will follow you around and could possibly hurt a credit score for up to seven years.  90 days is a often a company standard for what is considered bad debt or possibly uncollectible.  Creditors at all cost want to avoid payments that are 90 days late and even one can a large drop in a credit score.
    • 120 Days Late – at this point of severity creditors consider the debt to uncollectible and this is often then written off or is sent to a collection agency.

    Being 120 days late can result in several outcomes besides just being listed as late.  It can result in:

    • Settlements – these are agreements between a creditor and individual in the effort by the creditor to collect some if not all the debt.  This is a severe delinquency and will be noted as a debt settlement on your credit report.
    • Repossession and Foreclosure – obviously the taking back of collateral whether house or car is a true sign of delinquency.  This as serious as it comes and will be noted accordingly on your credit report.
    • Collections – if after a certain point a creditor believes that debt will remain in delinquency, they will send the account to collections.  This is often farmed out to a collection agency.  Additionally, paying the collection agency will not have them removed from your credit report.

    You need to understand that being late on any amount regardless of the amount carries the same negative effect on your credit score.  So a late amount of $40 is just as negative as being late on $1000.

    You need to avoid late payments.  Their implications can haunt a credit report for a very long period of time.  If you are late catch them early and get your payment in.  Hitting the 90 day mark will especially follow you around.

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