It’s that not unusual for a late payment to happen during the course of your life – in fact, you might not even think it’s a big deal. But while a creditor won’t show up at your door simply because your payment is late, it can have a bigger effect than you may realise.
Usually when you set up an account with a company – for a service or for credit – you have to make monthly payments on a set date. If the amount you need to pay arrives after the agreed date or, in some cases, after the grace period has passed, it’ll be deemed late.
There can be many reasons for making a late payment; from simply forgetting to more serious reasons, such as financial difficulties.
While you may not worry too much about a missed payment, especially if you’ve paid it as soon as you’ve realised, it will have an effect on your credit score.
Your credit report is there to show how well you have managed your finances and how reliable you are at paying back credit. While the odd late payment, particularly if the rest of your accounts are in good standing, may not impact your score too much, do it too often and it can have a negative effect.
The higher the frequency and severity of late payments, the larger an impact it will have on your score. And, late payments do remain on your report for up to six years.
Your credit report is important to lenders when they need to make a decision on your application for a car loan. So if your late payments have affected your credit score, it’s likely that it could affect your chances of being approved or accessing the best interest rates too.
However, every lender is different and has their own set of eligibility criteria. Some may take evidence of late payments more seriously, as it could indicate you’re not managing your finances well.
How recent the late payments are will also affect how negatively the lender views them. If you’ve missed many payments in the last three months, it’ll look worse than if the late payments were from four years ago.
When it comes to car finance, it’s always better to have a good credit score, so if a late payment has taken your score down – even a little – it’s worth spending some time trying to improve it, as it could take you under what the lender deems acceptable for a score.
A late payment can be noted on your credit report as soon as the day after the payment was missed. After that, late payments stay on your credit report for six years or, if you’ve closed the account, six years following that.
The impact of late payments on your credit score, though, will lessen over time if you continue to make payments on time and keep all of your other accounts in good standing.
Late payments can happen for a variety of reasons, but if you feel if it was due to a circumstance beyond your control, such as redundancy or another payment being taken out of your account before it should have been, you can ask the company to add a notice of correction to your credit report.
If you think a late payment has been noted in error, get in touch with a credit reference agency who will then investigate it and remove it if it’s wrong. In the UK, these are Experian, Equifax and TransUnion.
If it hasn’t been made in error, there are other steps you can take, though, to boost your score and balance out the missed payment.
You should deal with a late payment as soon as possible. If you can pay it, do so along with any interest or fees that have been added. If it’s inescapable, and you know you it will be late, contact the company straight away and see if they can help arrange a temporary solution.
If you can’t pay, it’s important not to ignore the problem. One late payment may not make too much of a dent in your credit score, but if the account is not brought up to date, it can lead to arrears or even a default, which could have a severe impact on your credit score.
Of course, sometimes it’s simply unavoidable for one reason or another, but a late payment on your credit report isn’t the end of the world. There are steps you can take to boost your credit score and get back on track.
Find out how to improve your credit score here:
Once a late payment has been made, it’s important to keep on top of payments going forward to ensure you don’t damage your credit score any further.
It’s a good idea to automate payments or schedule reminders for when they’re due.
Find out how long the payments take to reach your lender too, as some will take longer than a day. If you’ve missed a payment due to stretched finances, if possible, start to save a little money for a bit of breathing room in your budget.
Life can be unpredictable and we understand that sometimes finances aren’t all smooth running. If you’re worried that late payments in the past could have impacted your credit score, check your report and see what can be done.
Poor credit doesn’t mean that you won’t find the right car finance deal for you and we can help. We specialise in helping those with lower credit scores to secure finance and get on the road. Using our free soft credit search tool, you can find out if you’re eligible.
If you need to discuss your situation further or need some advice on getting the right new, nearly new or used car on finance, contact our team and we’ll be happy to help.
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|Loan Amount||Total Cost of Credit||Representative APR||60 Monthly Payments||Deposit Amount||Loan Term||Total Amount Payable|
|£7,500||£3831||19.1% APR||£188.85||£0||60 Months||£11,331|
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