One late payment can drop your credit score by 40-100 points, even after rebuilding. Your payment history makes up 35% of your score, the biggest factor. Even if it’s just one day late, credit card companies and lenders may report it. A single late payment can stay on your report for 7 years.
The best way to avoid missing a payment is to automate the process as much as possible.
Set up autopay for at least the minimum payment, so even if you forget, your account stays current. If you’re worried about overdrafts, schedule payments for right after payday or use a separate bank account just for bills.
If autopay isn’t an option, set up reminders through your phone calendar, banking app, or email alerts.
Paying bills a week early can also help avoid last-minute issues. If you prefer a more hands-on approach, a budgeting app like Mint or YNAB can track due dates and send notifications.
To effectively learn how to use Mint and You Need A Budget (YNAB) for managing your finances, consider the following resources:
If money is tight, always try to pay at least the minimum to protect your credit score.
If you’re worried about overdrafts, set autopay to pay the minimum, then manually pay extra when you can.
Keeping a small emergency fund can help cover unexpected expenses and prevent missed payments. If you ever do miss one, call the creditor immediately—sometimes they’ll remove the late fee or even a late mark on your credit report if it’s a one-time mistake.
The second most common mistake after bankruptcy is carrying a high credit card balance (high credit utilization).
- Credit utilization makes up 30% of your credit score, so keeping a high balance can prevent your score from rising.
- Many people think using a lot of their credit limit builds credit faster, but the opposite is true.
- Ideally, you should keep your credit usage below 10% of your limit—even though most experts say 30% is the max, staying lower speeds up score recovery.
