Can Late Payments Affect My Interest Rate?

One of the most important things to do to protect your credit is to always make your payments on time. Paying just one bill more than 30 days late can have an impact on your financial history that will last for years. A question we hear frequently is “Can late payments affect my interest rate?” On credit cards, making a payment late by only a day or two may lead to a higher interest rate and extra fees. Late payments can also have an impact on your ability to take out a new loan.

Extra Fees on Credit Cards

If you forget to make a payment on a credit card, you may be faced with extra charges immediately. A credit card payment made just one day after the due date may trigger a late charge, usually between $25 and $35. 

The credit card company may raise your interest rate to a penalty rate that may be as high as 29.99 percent. The amount of interest you owe each month may be noticeably higher, especially if you were enjoying a promotional rate of 0 percent. Once your interest rate has been changed to the penalty APR, the higher rate may apply going forward. This means it will take longer to pay back what you owe, and it’s much more expensive to carry a balance on your credit card.

Your Credit Report

Paying the bill on a credit card a day or two late isn’t reflected on your credit report. Late payments don’t show up on your credit report unless your payment is more than 30 days late. If you have at least one payment paid more than 30 days after the due date or if an account is sent to a collections agency, it shows as a negative item on your credit report. 

Borrowing Money After Late Payments

A negative item can bring down your credit score and stay on your credit report for seven years. This means if you try to take out a loan or open a new credit card account, you may be turned down, or you may be approved at a high-interest rate. While one late payment can damage your credit score, there will be a bigger impact if you miss payments on multiple accounts or if you continue to not pay back what’s owed. 

Protecting Your Credit

Make sure you don’t end up with bad credit over carelessly forgetting to pay a bill. Your credit card issuer may offer reminders and notifications. Take advantage of those or set a reminder on your phone when a payment is due. Consider setting up automatic payments on loans and credit cards and pay at least the minimum amount due.

It’s important to keep an eye on your credit reports to make sure that everything on them is accurate. If late payments are being reported inaccurately, file a dispute with the credit bureau right away. Dovly is an automated credit repair engine that can make this process simple. Try it risk-free with our free membership tier. Contact Dovly today.