How Long Do Missed Payments Affect Credit Score?

If you've missed a payments on your credit card, a car loan, student loan, or mortgage, and a late payments was reported on your credit report, you might be wondering how long does a missed payment affect your credit score for? We will answer this question in much detail below.

How Long Do Missed Payments Affect Credit Score?

Missed payments affect your credit score for a minimum of 12 months to 18 months. Missed payments remain on your credit report for 7 years from the date you missed your payment. After 7 years, the late payment will automatically be removed from your credit report. As the late payment mark ages, its effect on your credit score lessens until it's ultimately removed from your credit report.

Typically, missed payments are only reported as late to the credit bureaus after the payment is 30+ late. Payments that are more than 30 days late result in a 30 day missed payment mark being added to your credit report.

A missed payment has the biggest effect on your credit score when it's first reported on your credit report. As the missed payment ages, its impact on your credit score will lessen until it's ultimately removed from your credit report after 7 years.

The exact number of points your credit score will drop as a result of a late payment depends on what is in your credit report. Typically, the higher your credit score, the bigger the drop will be. Persons who already have negative items bringing down their credit score may notice a lower drop in their credit score because it's already being dragged down by other negative items.

Furthermore, the affect on your credit score depends on whether your missed payment led to other negative items being added to your credit report.

For example, if you have several missed payments and your account was sold to a collection agency, the collection agency may added a collection account to your credit report further bringing down your credit score.

Another example would be missing a payment on your car loan. If you miss several payments, your vehicle may be repossessed, causing a repossession to appear on your credit report, affecting your credit score negatively and bringing it down significantly.

So the effect that a missed payment may depend not only on the late payment that's reported to the credit bureaus but also on the series of events that may follow a missed payment.

When Does a Missed Payment Affect Your Credit Score?

A missed payment typically affects your credit score when it's reported on your credit report. Missed payments are reported to the credit bureaus after the payment is 30+ days late. After your payment is 30 or more days late, the lender updates your account status as 30 days late, prompting the credit reporting bureaus to add a 30-day late payment notation to your account.

Even if you make your payment after the 30-day late payment notation is added to your credit report, the 30-day late payment notation will remain on your credit report for 7 years from the date you missed your payment. After the 7 year period, the late payment will be removed from your credit report. Late payments have the biggest effect on your credit score when they're first added. As the late payment ages, its impact on your credit score lessens.

Furthermore, if you fail to make subsequent payments, a 60-day late payment, a 90-day late payment, and 120-day late payment notations will be added to your credit report. So, as the delinquency increases, the negative impact on your credit score increases as more late payment notations are added.

So, if you've missed a payment, the best course of action to improve your credit score and prevent further damage is to continue making payments if you can afford to do so. This prevents further damage to your credit.

How Can You Know If a Missed Payment is Affecting Your Credit Score?

You can figure out whether a missed payment is affecting your credit score by reviewing a copy of your credit report. You can review a copy of your credit report online by using many of the free and paid services out there for checking your credit. A simple Google search for checking your credit report will reveal dozens of free and paid sites for you to choose from.

Once you've obtain a copy of your credit report, go to the accounts section and look at the payment history of each and every account that you have. If all payments are marked with a paid notation or green color, this means that you've made your payment on time. However, if there is a 30 day late payment notation, this means that your account has a missed payment and is therefore marked as being late.

Keep in mind, a single missed payment that is 30+ day late can affect your credit score, significantly bringing it down, especially if you had a high credit score before the late payment. The higher your credit score, the bigger the drop will be from a late payment.

What Should You Do If You've Missed a Payment On Your Credit Card, Loan, or Mortgage?

If you've missed a payment on your credit card, car loan, or mortgage, you have 30 days from the due date to make your payment without a late notation being added to your credit report. This is so because payments are only reported as late after 30 days of missing your payment. So, if it has been less than 30 days, you should try to make the payment even if it's late as this will prevent it from being reported as late on your credit report.

If you're 30 or more days late on your payment, your lender or creditor is likely to report the payment as 30 days late, adding a 30-day late payment mark to your credit report. If you've missed a payment, you should try to make your remaining payments on time to avoid additional late payment marks from being added to your credit report. Making your payment will help you avoid additional damage to your credit.

Does Making a Partial Payment Affect Your Credit Score?

Unfortunately, making a partial payment that's less than the minimum amount due will affect your credit score as your account will still be reported as being late. This is so because you're legally obligated to make a payment in the full amount, anything less will cause your account as being marked late, lowering your credit score.

How to Avoid Missing Your Payments?

  1. Alerts - Set up alerts to alert you as to when your payment is due. This will prevent you from forgetting that your payment is due.
  2. Due Dates - Contact your card issuer or lender and ask them to change your due dates to align with your paycheck. This will ensure that you have money to make the payment at the time that it's due.
  3. Automatic Payments - Setting up automatic payments can be a great way to ensure that your credit cards and loans are paid on time. That said, you should be careful when setting up automatic payments, this is so because if you do not have sufficient funds in your account, your account may be overdrawn, resulting in overdraft fees.

Frequently Asked Questions (FAQs)

1. How long does 1 missed payment affect credit score for?

A single missed payment will affect your credit score 12 to 18 months. As the late payment ages, its impact on your credit score lessens until it's ultimately removed from your credit report.

2. Can I get a late payment removed from my credit report?

You cannot get a valid, accurate late payment removed from your credit report. However, if there is a late payment that is inaccurate, you can file a dispute with credit bureaus to have it removed from your credit report.

3. How long does it take to improve credit score after a late payment?

It takes 12 to 18 months for your credit score to recover from a missed or late payment. As the late payment ages, its effect on your credit score will lessen until it's removed from your credit report after 7 years.

4. How to fix my credit score after a late payment?

You can fix and improve your credit score after a late payment by making all of your payments on time, reducing your balances, refraining from applying for new credit, and keeping your old accounts open.


Do Store Credit Cards Build Credit?

You've probably been to a department store where you've been offered to apply for a store credit card in exchange for a huge discount, and so you might be wondering do store credit cards build credit? We will answer this question in much detail below.

Do Store Credit Cards Build Credit?

Some store credit cards do help build credit because they report your account status to the credit bureaus (Experian, Transunion, and Equifax), however, not all store credit cards will help you build credit. Store credit cards that don't report your account status to the credit bureaus will not help you build credit. Research the specific store credit card to determine whether it builds credit before applying.

If your store credit card reports to the three major credit bureaus, your store credit card will help you build credit so long as you use it responsibly by making all of your payments on time and keeping your account balances low.

That said, you should be aware that only credit cards build credit, rewards cards, membership cards, and other forms of rewards cards that help you accumulate points will not help you build credit.

Here is a list of some store credit cards that will help you build credit:

  1. Amazon Credit Card
  2. Target RED Card
  3. Walmart Credit Card
  4. Best Buy Credit Card
  5. Kroger Credit Card
  6. Home Depot Credit Card
  7. Wallgreens Mastercard Credit Card
  8. Apple Credit Card
  9. Macy's Credit Card
  10. Starbucks Rewards Visa Credit Card

If the store credit card you're applying for reports your account status to the credit bureaus, your store credit card will help you build credit. Some store credit cards help you build credit because they do report your account status to the credit bureaus.

That said, if you apply for a store credit card that is co-branded with a large payment network, such as Visa, Mastercard, or American Express, there is a good change that your store credit card reports your account status to the credit reporting bureaus.

However, some smaller store credit cards may not report your account status to the credit bureaus. In this case, your store credit card will not help you build credit.

So, if you want to open a store credit card than help you build your credit, you should contact the card issuer before applying and asking them whether they report to the three major credit bureaus. If they do report the store credit card's status to the credit bureaus, your account will help you build credit if you use your credit card responsibly and make your payments on time.

It's important to note that some store credit cards that only work in the store that issued them do not report to all three credit bureaus or only report to one of the credit bureaus. So, when choosing a store credit card that will help you build credit, you should choose one that reports to all three credit bureaus.

How Do Store Credit Cards Impact Your Credit Score?

If you choose a store credit card that reports to all three credit reporting bureaus for it to help all three of your credit scores.

1. Pay Your Store Credit Card On Time - For your store credit to help your credit, you should ensure that you at least make your minimum payment on time. This is so because your payment history accounts for 35% of your credit score, so paying your credit card on time will definitely help your credit. That said, missing even a single payment on your store credit card can cause significant damage to your credit. So, make sure to pay your store credit card on time for the best impact on your credit score. Also, if you are clumsy like us and often forget to make your minimum required payment, most card issuers allow you to set up automatic payments, so that you can at least make the minimum payment to avoid hurting your credit.

2. Keep Your Balance Low - When you use your store credit card, you should try to keep your credit utilization (use of available credit) at or below 10% and never exceed 30%. If you use more than 30% of your available credit and you leave a high balance, you can lower your credit score. This is so because your credit utilization accounts for 30% of your credit score. So, keep your account balance for your store credit card to help your credit score. So, for example, if your store credit card has a $2,000 credit limit and you leave a balance on your credit card of $1,000, you're using 50% of your available credit. This can lower your credit score because credit bureaus factor in your credit utilization when calculating your credit score. So, avoid leaving a high balance on your store credit card.

3. Don't Apply For Too Many Accounts and Loans - Other than using your store card responsibly and making your payments, to build credit, you should refrain from applying for other credit cards and loans. This is so because each time you submit a credit card or loan application, a hard inquiry is added to your credit report, slightly lowering your credit score.

4. Assistance Making Payments - If for any reason, you're unable to make your payments on time, you should contact your store card issuer and ask them about your options. Some card issuers may be willing to work with you, allowing you to skip a payment or come to some sort of agreement as to how the balance is paid down. That said, if that does not work, you can try credit counseling services that are available to you, and they should be able to provide you with your options.

Should You Even Apply For a Store Credit Card?

It's often tempting when you're standing to check out at a store and the cashier tells you that you can get 30% off your entire order if you open a store credit card to apply for the store credit card to get the discount. But, you should keep in mind that merely applying for the store credit card may lower your credit score because a hard inquiry is added to your credit report when the store reviews your credit report to determine whether to open the account for you. That said, a hard inquiry will only remain on your credit report for two years, after which it's automatically removed from your credit report.

So, before you apply, you should ask yourself: what are the odds of you being approved? Do you meet the store credit card lending criteria? If you have excellent credit, your chance of being approved is very high. However, if you have bad credit, applying could further lower your credit score. So, keep this in mind before even applying. If your reject, the hard inquiry will still appear on your credit report, alerting future lenders that you've been seeking credit.

You may benefit from opening a store credit in terms of the benefits you get by becoming a cardholder as many store credit cards offer unique benefits to their cardholders, such as discounts and early access to some items that are not available to persons without the store card. So, before applying you should consider whether the benefits offered by the store credit are worth applying for it.

That said, before opening a store credit card, you should consider the fact that store credit cards often have a higher interest than regular credit cards. So, if you are planning on leaving a balance on your store credit card, you should know that you will be paying more interest on the card balance. This is something to keep in mind as it could negate any discounts that you receive as a cardholder.

Also, there are many rewards credit cards that offer points for purchases, so it's worth looking at whether the rewards and perks offered by your store credit card exceed those of a rewards credit card. If they do, then applying may make senses, but if they do not, you're better off using a rewards credit card than opening a store credit card.

At the end of the day, the decision is up to you. If you like the benefits offered by a store credit card, and you meet the requirements, there is nothing wrong with opening a store credit card. Just weigh the factors discussed above before doing so that you can make an informed decision.

Overall, a store credit card makes sense if the following apply to you:

  1. You frequently shop at the store, allowing you take full advantage of the benefits, rewards, and perks offered by the store credit card
  2. You can keep your card balance low to avoid paying high interest rates on the balance
  3. You want to take advantage of an interest-free period the card offers
  4. You pay off your balance in full at the end of each billing cycle

Frequently Asked Questions (FAQs)

1. Can store credit cards improve your credit?

Yes, store cards that report to the three major credit bureaus can improve your credit so long as you use your store credit card by always making your payment on time, and keeping a low balance on the card. However, not all store cards will improve your credit. If you want a store credit card that can improve your credit, you must select one that reports to the credit bureaus. As your card issuer whether they report the credit bureaus if you want a card that will help you build your credit.

2. Do store cards hurt your credit?

Applying for a store card can temporarily slightly hurt your credit and lower your credit score because when you apply for one, a hard inquiry is placed on your credit report. A hard inquiry can lower your credit score by a few points. That said, the imapct of a hard inquiry wears off after 12 months, and it's removed after 2 years automatically.

3. What store cards build credit?

Walmart, Target, Best Buy, Amazon, Starbucks, Home Depot, Walgreens, Apple, and many stores have credit cards that can help you build credit. Research the credit card you want before applying to see if that specific store credit card reports to the credit bureaus to help you build credit.

4. Can you get a store credit card with bad credit?

You may be denied if you have bad credit as most store credit cards require a credit approval. So, if you have bad credit, you could be rejected.


Should You Pay Off Your Credit Card Weekly?

If you're in the habit of paying off your credit card early and on a weekly basis, you might be wondering whether this is the right move. We will provide you with everything you need to know about paying off your credit card on a weekly basis?

Should You Pay Off Your Credit Card Weekly?

If you have the money, you should pay off your credit card weekly as it reduces the amount of interest you pay on the balance, prevents you from reaching your credit limit, and lowers your credit utilization rate, which can improve your credit score. Your credit card utilization refers to how much of your available credit you're using. The lower this number, the better your credit score will be. This is so because your credit utilization (how much of your available credit you're using) accounts for 30% of your credit score. The lower your credit utilization, the better your credit score will be. So, paying off your credit card weekly reduces your credit utilization, improving your credit score.

Benefits of Paying Off Your Credit Card Balance Weekly

Let's discuss some of the benefits associated with paying off your credit card on a weekly basis:

1. Improve Credit Score Through Lower Credit Utilization

Again, paying off your credit card early on a weekly basis can improve your credit score. This is so because credit scoring models such as FICO and Vantage Score reward those with lower account balances with a higher credit score. As a rule of thumb, you should always strive to keep your account balances below 10% of your available credit limit and to never exceed 30% utilization. If you exceed 30% utilization, your credit score will be negatively impacted.

2. Reduction in the Amount of Interest Owed

Paying your credit card early on a weekly basis not only reduces your account balance, improving your credit score, but it also reduces the amount of interest you'll have to pay on your credit card balance. This is so because if you're carrying a credit balance, your card issuer is probably charging you interest on your average daily balance. So, paying off your balance early reduces the amount of interest you're paying, saving you money.

For example, if you're carrying a $2,500 balance, making three payments of $300 four times a month will reduce the amount of interest that you owe more than would making a single payment of $1,200 at the end of the month. This is so because interest accrues or is calculated based on the daily average balance. So, making multiple weekly payments will reduce the amount of interest that you owe on your credit card.

3. Saving Money On Late Fees

By making your credit card payments on a weekly or bi-weekly basis, you ensure that you are not going to be charged late fees for failing to make the minimum payment on your credit card. Always making your payments on time ensures that your credit card will have a positive impact on your credit score. This is so because your payment history accounts for 35% of your credit score. So, always making timely payments will improve your credit score.

4. Paying Down Balance Faster

Making weekly payments can be a great way to force yourself to pay down your credit card balance faster. This is so because getting into the habit of allocating money to pay off your credit card weekly encourages you to pay down your balances faster. Repeatedly seeing your balance decrease is a great motivator for you to allocate more funds to pay down your credit card weekly.

5. Make Room For More Charges

Paying down your credit card on a weekly basis adds room for you to make purchases that matter. For example, if you have a low credit limit, and you have expenses that exceed your credit limit, paying down your balance on a weekly basis to make more credit available is a good idea. Just make sure that you do not leave too high of a balance at the end of your closing period to avoid a point drop due to high credit utilization.

6. Monitoring Your Budget

Paying you credit card on a weekly basis puts you in the habit of monitoring your spending and prevents you from being surprised when your credit card statement arrives. If you don't like the idea of paying your card on a weekly or bi-weekly basis, you should still often login into your online bank and check your spending to avoid a hefty minimum payment at the end of the month.

When It Doesn't Make Sense to Pay Off Your Credit Card Weekly

If you usually pay off your credit card in full at the end of every month, you're probably not keeping a balance on your credit card. If you are not keeping a balance on your credit card, this means that you're not paying interest, and therefore you may not have a good reason for making weekly or multiple credit card payments per month. This is so because credit card issuers provide an interest free grace period, which lasts until your next due date date. So, you're not saving money on interest.

Nevertheless, if you want to make weekly card payments to avoid getting into your debt and to stay on top of your spending, there is nothing wrong with doing. So, if you're someone who uses credit cards as merely a payment tool and not a debt tool, this is great because you're benefiting from the rewards that your credit card has to offer without racking up debt and losing money on interest fees.

Is It Bad to Pay Off Your Credit Card Weekly?

Paying off your credit card weekly is good for people who keep a balance on their credit card as it reduces the amount of interest they end up paying. Also, it lowers credit utilization, which has a positive impact on their credit score. So, there is nothing wrong with paying off a credit card on a weekly basis.

Is it Better To Pay Off Your Credit Card Weekly or Monthly?

If the balance on your credit card at the end of the month would be close to your spending limit, it makes sense to pay it off weekly in order to avoid a high credit utilization on your credit card. As a rule of thumb, you should keep your credit utilization below 10% and never exceed 30% credit utilization. If you exceed 30% utilization, your credit score will drop as a result.

What Happens If You Pay Off Your Credit Card a Week Early?

If you pay off your credit card a week early, you may reduce the amount of interest owed on the balance and reduce your credit utilization. Only positive things will happen when paying off a credit card early as there is no penalty for making early payments.

Can You Make Multiple Payments On Your Credit Card?

You can definitely make multiple payments on your credit card. In fact, if you're nearing your credit card's limit, you should reduce the balance before the close of your statement.


Does a Debit Card Build Credit?

If you're like most people and you have a debit card, you might be wondering whether having a debit card will help you build your credit? We will answer this question in much detail below.

Does a Debit Card Build Credit?

No, debit cards do not build credit because the status of the checking or savings account connected to your debit card is not reported to the credit reporting bureaus (Experian, Transunion, and Equifax). As such, your debit card will not help you build credit. Debit cards are different from credit cards because the status of credit card accounts is reported to the credit bureaus, so they do help you build credit if you use them responsibly.

When you use your debit card, money is deducted from your checking or savings account, so you're not borrowing money, and therefore your account status is not reported to the three major credit reporting bureaus (Experian, Transunion, and Equifax). On the other hand, when you use a credit card to purchase goods or services, you're borrowing money from the financial institution that issued you your credit card. Most of the time, when you borrow money, your account status is reported to the three major credit reporting bureaus.

If you only have a debit card and have no credit cards or loans, your credit file may be empty and you may not even have a credit score because there is no information in your credit file from which a credit score can be calculated for you.

Although debit cards are a great way for making everyday purchases, you should consider getting a credit card because credit cards help you build your credit. Building good credit is extremely important because if you decide to take out a mortgage to purchase a home or you want to finance a vehicle, most lenders will want to see your credit history to see how you've managed debt in the past. If you haven't built your credit, they will have no information based on which to lend you money and assess your credit risk. So, get a credit card in addition to your debit card and start building your credit today.

Should You Apply For a Credit Card Instead of a Debit Card to Build Your Credit?

If you're over 18 years old, you should definitely consider opening a credit card account vs only using a debit card. This is so because once you have a credit card, your credit card account status will be reported to the credit bureaus. If you make your payments on time and keep your credit card balance, you will begin your journey of building good credit. Building good credit is extremely important in the United States because everything from buying a vehicle to taking out a mortgage to buy your first home depends on your credit history. Only using a debit card will not help you build credit. As such, you should have at least one credit card account to built good credit.

If it's your first time applying for a credit card, you may be denied by some banks. If you're not approved for a credit card, you should consider applying for a secured credit card. A secured credit card will help your credit just as would a regular credit card. The only difference is that to obtain a secured credit card, you will have to pay a security deposit, ranging from $200 to $5,000 and your security deposit determines your credit limit (how much money you can borrow on your credit card). The higher your security deposit, the more you can borrow. Typically, your credit limit is equivalent to your security deposit. So, if you place a $500 security deposit, you will be issued a credit card with a $500 credit limit.

Once you have your secured credit card in hand, you would use it just as would a normal credit card. You would use it to make purchases, and at the end of the month, you would need to make a payment to pay down your account balance. You should use your secured credit card responsibly because your account status is reported to the credit bureaus. So, make your payments on time and do not leave a large balance on your credit card. This is so because missing a payment can cause significant damage to your credit. Also, leaving a large balance on your card could lower your credit score. So, use it responsibly just as you would a regular credit card.

When Should You Use a Debit Card vs Using a Credit Card?

If you want to make a large purchase and you do not have sufficient funds on your account, you should consider using your credit card, For example, if you want to buy a desktop computer that costs $1,200 and you only have $900 in your checking account, you can use your credit card to make the purchase instead of overdrawing your checking account. After making the purchase, you can pay down your credit card gradually. That said, you should pay down the balance as promptly as possible to avoid paying too much money on interest. This is so because if you leave a balance on your credit card, you will be charged interest on that amount.

That said, if you have the money in your checking account and you do not want to pay interest fees, you can go ahead and use your debit card for such a purchase. Debit cards, although do not build credit, are still a great tool for avoiding getting yourself into debt. This is so because you can only spend what you have, you cannot borrow money on a debit card. So, debit cards are a great way to prevent overspending and landing yourself into debt. This is so because even though credit cards facilitate large purchases, it's often too easy to rack up unpayable amounts of debt within a short period of time.

Nevertheless, if you want to build your credit and earn points while doing so, credit cards are a great tool for doing so, so long as you use them responsibly.

Frequently Asked Questions (FAQs)

1. Can you get a credit score with a debit card?

If you only have a debit card, and have no credit cards and no loans, you will not be able to get a credit score. To get a credit score, you need to have a credit card, loan, or borrow money and make payments on an account. Without these items, your credit report will not have any information in it based on which the credit bureaus can calculate a credit score for you.

2. Do Visa debit cards build credit?

No, most Visa debit cards do not build credit. In general, debit cards are not used to borrow money. As such deposit accounts linked to debit cards are not reported to the credit bureaus. Since they're not reported, they cannot be used to build credit.

3. What is the fastest way to build credit?

The fastest way to build credit is to open a credit card, make payments on your credit card account, and keep your account balances low. Within just a few months of responsibly using your credit card, you could build a decent credit score in the low 700s. That said, you should make sure to make all your payments on time.

4. Can you go into debt with a debit card?

Although debit cards do not allow you to borrow money, if you overdraw your checking account, you could end up owing money to your financial institution.

5. How do debit cards affect your credit score?

Debit cards have no effect on your credit score because deposit accounts, such as checking accounts and savings accounts are usually not reported to the credit bureaus, therefore, they have no impact on your credit score.


Does Applying For a Personal Loan Affect Credit Score?

If you're thinking about applying for a personal loan, you might be wondering whether applying for a personal loan affects your credit score. We will answer this question in much detail below.

Does Applying For a Personal Loan Affect Credit Score?

Yes, applying for a personal loan does affect your credit score because when you apply for a personal loan, a hard inquiry is added to your credit report when the lender reviews your credit report. A hard inquiry can lower your credit score by a few points. So, a personal loan can lower your credit score regardless of whether you're approved for the loan or denied since a hard inquiry is added to your credit report.

When you apply for a personal loan, your lender will want to review your credit report and take a look at your credit score to assess your creditworthiness in order to determine whether you're likely to repay the loan as originally agreed. When a lender reviews your credit report, a hard inquiry is added to your credit report, alerting future lenders and creditors that you've been seeking to borrow money.

A hard inquiry from applying for a personal loan will appear on your credit report for 2 years from the date you applied for the personal loan. After the 2 year period, the hard inquiry will be removed from your credit report. That said, experts agree that a hard inquiry resulting from a personal loan application will only affect your credit score for 12 months from the date it's added to your credit report. As the hard inquiry ages, its impact on your credit score will lessen.

If you're applying for a personal loan, you likely cannot avoid a hard inquiry because lenders will want to review your credit report to determine whether to lend you money. That said, a hard inquiry will only lower your credit score by just a few points, so it might be worth it for you to apply for a personal loan. That said, you should avoid applying for too many personal loans within a short period of time, because each time you apply, a hard inquiry is added to your credit report.

You should avoid submitting too many personal loan applications and other credit applications because although a single hard inquiry is unlikely to cause a big drop in your credit score, submitting too many applications within a short period of time can significantly lower your credit score.

Can a Personal Loan Raise Your Credit Score?

Yes, if used properly, a personal loan can definitely affect your credit score positively and raise it. For example, if you make all of your personal loan payments on time, this will boost your credit score. This is so because your payment history accounts for 35% of your credit score, so making timely payments will affect your credit score positively, raising it.

Additionally, if you use the proceeds from a personal loan to consolidate your debts by paying off other loans and credit cards, you could see a substantial boost in your credit score. Personal loans are often used to consolidate credit card debts because they have a lower interest rate than credit cards, allowing you to pay down your balances faster since less money is wasted on interest. Whenever you decrease your account balances, your credit score improves. This is so because your credit utilization accounts for 30% of your credit score. So, using the proceeds to pay down your debts faster can improve your credit score.

Furthermore, a personal loan can improve your credit score because it improves your credit mix, which refers to the diversity of debt products that you're using. Your credit mix is factored into your credit score and accounts for 10% of your credit score. So, a personal loan can improve your credit for this reason.

Can a Personal Loan Lower Your Credit Score?

Yes, a personal loan can lower your credit score for a variety of reasons that we will explore below:

First, a personal loan can lower your credit score by a few points because, as mentioned above, a hard inquiry is added to your credit report whenever you apply for a personal loan which is customary when a lender reviews a copy of your credit report for lending purposes. That said, a hard inquiry will only knock down your credit score by a few points, and your credit score will quickly recover soon thereafter.

Second, the status of your personal account is reported to the credit reporting bureaus. If you fail to make your payments on time, you could cause significant damage to your credit score. So, to avoid damage to your credit, you should make all of your payments on time.

Third, if you're taking out a personal loan for a purpose other than consolidating your debts or paying them off, you may cause a drop in your credit score because taking on debt increases your account balances, which is factored into your credit score.

Things You Should Consider Before Applying For a Personal Loan

Let's explore some things that you should consider before applying for a personal loan:

1. Getting into more debt - Before applying for a personal loan, you should think hard about whether you want to get yourself into debt. If you want to take a vacation and need the funds to finance it or want to make an expensive purchase, you should really think about whether you want to get yourself into debt to do so. It might be worth it for you to save up for the item you want to purchase instead of locking yourself into monthly payments for years to come.

2. Interest Rate and Fees - Before taking out a personal loan, you should consider whether your credit score qualifies you for a reasonable interest rate. You should make this consider because if your credit score is low, you may still be approved but at an astronomically high interest rate, which will cause you to have to pay back much more than what you borrowed. So, consider the interest rate you may qualify for before applying.

3. DTI - Before applying for a loan, you should consider your DTI (debt-to-income) ratio. As a rule of thumb, you want your debt to income ratio to be less than 43%. Typically, the higher your DTI, the less likely it is that you'll be approved for a personal loan, and if you're approved, you might be approved at a very high interest rate.

4. Consider you options - Before settling on a personal loan to apply for, you should shop around and research the personal loan that you want. Consider the rates typically offered by lenders and search for one that has the lowest interest rate and most favorable repayment terms.

If after considering these factors you decide that applying for a personal loan is the right move for you, you should review your credit report and credit score to see the impact the personal loan had on your credit. There are plenty of apps and websites that provide you with the ability to check your credit for free.

Frequently Asked Questions (FAQs)

1. Why does applying for a personal loan lower your credit score?

Applying for a personal low may lower your credit score by a few points because when you apply and a lender reviews a copy of your credit report, a hard inquiry is added to your credit report, slightly lowering your credit score.

2. Does applying for a personal loan result in a hard inquiry?

Yes, applying for a personal loan results in a hard inquiry that will remain on your credit report for 2 years, after which it's automatically removed from your credit report.

3. How long does a declined loan stay on your credit file?

A hard inquiry resulting from a declined loan application will remain on your credit file for 2 years from your application date. After the 2 year period, the hard inquiry is automatically removed from your credit report.


How Long Do Missed Payment Stay On Credit Report?

If you've missed a payment on a credit card account, loan account, home mortgage, on any other account, you might be wondering, how long do missed payments remain on your credit report for? We will answer this question in much detail below.

How Long Do Missed Payments Stay On Credit Report?

Missed payments will stay on your credit report for 7 years from the date that you became delinquent on your account or missed your payment. After the 7 year period, the missed payment (late payment) will be automatically removed from your credit report. Although 7 years may seem like a very long time for a missed payment to remain on your credit report, its impact on your credit score will begin to lessen as the missed payment ages. Additionally, even if you make your account current and continue to make your payments on time, the late payment will not be removed. That said, there are some things that you can do in the meantime to improve your credit score. For example, make all of your payments on time and reduce the balances on your accounts, and you should notice an improvement in your credit score over time.

When is Your Payment Considered a Missed Payment?

Typically, your payment is considered as a missed payment if it is more than 30 days past due. For example, if your payment due date is March 1, 2022 and you fail to make your payment before March 31st, 2022, your payment will be considered as missed, and your lender will likely report the payment as late on your credit report. The 30 days late payment notation will then appear on your credit report for 7 years from March 1, 2022, meaning it will be removed from your credit report on March 1st, 2029. We long this is a long period of time, but that's how long late payments remain on your credit report.

The same logic applies if you fail to make your payment on the following month. If you fail to make a second payment, a 60 days late payment will be reported to the credit reporting bureaus. The late payment notation will continue to appear on your credit report for 7 years from the date you first became delinquent on the account.

Remember, most lenders typically do not report your account as being paid late until you're 30 days past due. So, if you make your payment within the 30 day windows, it's unlikely that your account will be reported as being paid late. However, if you're more than 30 days late, your lender will most likely reported your payment as late on your credit report, causing a drop in your credit score.

How Do Missed Payments Affect Your Credit Score?

A late payment can cause a significant drop in your credit score. Typically, the better your credit, the bigger the drop will be. Yes, you heard that right. The better your credit, the bigger the drop will be. So, if you have excellent credit, you may notice a huge drop in your credit score, for example 100 or more points or more. Of course, this is different from one person to another.

That said, if you have poor credit, you've probably already done significant damage to your credit and so the point drop will not be as dramatic as someone who has never missed a payment. Also, you should keep in mind that missing several payments is much worse for your credit than missing a single payment. Additionally, missing payments on multiple accounts is much worse than missing payments on a single account. So, if you can still pay off your other accounts, you should continue to do so to avoid further damage to your credit.

Having said that, you should keep in mind that a missed or late payment will remain on your credit report for 7 years, after which it will be automatically removed from your credit report. However, its impact on your credit score will be the biggest when it is first reported on your credit report. As the missed payment ages, its impact on your credit score will begin to lessen until it's ultimately removed from your credit report.

The best thing that you can do to improve your credit after having a late payment reported is to continue making all of your other payments on time, and to reduce the balances on your account. Doing these two things ensures that your credit score recovers as quickly as possible.

Can You Remove a Missed Payment From Your Credit Report?

A valid missed payment cannot be removed from your credit report. It will remain on your credit report for 7 years from the date of the delinquency. Even if you make the late payment and continue making account payments on time, the late payment will remain on your credit report. You can only have a late payment removed from your credit report if you made the payment on time and it was reported as late or if the account does not belong to you. Other than these two situations, late payments cannot be removed from your credit report.

If you were not late, but a late payment was recorded on your credit report, you have the option of filing a dispute with the credit reporting bureau to have the late payment removed. The dispute process can take up to 30 days but it is usually performed within just a few business days, and you will have to provide evidence to prove that you indeed made the payment on time and that there is an error in what was reported to the credit bureaus.

How to Avoid Missing Payments?

If you want to avoid missing payments so that they're not reported on your credit report, you should setup reminders and alerts from your creditors and lenders so that you're alerted when your payment is due so that you can make them on time. Another method that you can use is to opt for automatic payments that are debited automatically from your checking or savings account, saving you the hassle of having to remember to make your payments on time. That said, with automatic payments, you should always ensure that there is sufficient money in your account to cover your payments. If you do not have sufficient money in your checking or savings account, your deposit account may be overdrawn to cover the payments, and you should avoid having your accounts overdrawn.

For example, for credit cards, you can typically setup automatic payments that will cover your minimum payment or a payment amount of your choice. This is one of the best ways to avoid having your credit card being hit with a late payment.

In the event that you do not have enough money to make your payments, you should contact your lender or credit as promptly as possible, and ask them about your options. Some lenders may allow you to skip a payment or two without having your account reported as late.

Frequently Asked Questions (FAQs)

1. Can I get a late payment removed from my credit report?

No, a valid late payment that belongs to you cannot be removed from your credit report. Only payments that were not actually late can be removed from your credit report.

2. How long does it take for a missed payment to fall off credit report?

A missed payment will fall off of your credit report within 7 years of you missing the payment. After the 7 year period, the late payment notation will automatically be removed from your credit report.

3. How much does a single late payment affect credit score?

A single late payment can drop your credit score by 100 or more points. The higher your credit score, the bigger the drop you will experience. The lower your credit score, the less of a drop because you may already have other negative items bringing down your credit score.

4. How to improve your credit score after missing a payment?

You can improve your credit by making all of your credit card and loan payments on time, reducing the balances on your accounts, avoiding applying for new credit, and keeping your old accounts open.

If you have any general questions or comments, please feel free to leave them in the comments section below. Thanks for taking the time to explore our content, we hope that you learned something new.


Does Your Income Affect Your Credit Score?

If you're like most people, you probably want to make sure that you have maintain the best credit score possible, so you might be wondering whether your income affects your credit score? We will answer this question in much detail below.

Does Your Income Affect Your Credit Score?

No, your income does not affect your credit score. In fact, your income is not even reported to the credit reporting bureaus to impact your credit score, as such it's not considered by the credit reporting bureaus when calculating your credit score. Technically, you could have no income and have excellent credit so long as you're making all of your payments on time. So, you can be the wealthiest person in the United States or the poorest person, and that fact will have no effect on your credit score.

The following items are not considered when calculating your credit score:

  1. Income
  2. Employment Status
  3. Marital Status
  4. Religious Affiliation
  5. Geographical Location

The following items are only factored in when calculating your credit score:

  1. Payment History - 35% of your credit score
  2. Account Balances - 30% of your credit score
  3. Length of Credit History - 15% of your credit score
  4. New Credit - 10% of your credit score
  5. Credit Mix - 10% of your credit score

These are the only factors that impact your credit score. You should also keep in mind that negative information, such as collection accounts, bankruptcy, and other negative items can lower your credit score, but income does not affect your credit score.

That said, although your income does not affect your credit score, you should not be surprised by the fact that lenders and creditors do ask for your income and your income does affect their decision as to whether to lend you money or extend credit to you. If you've ever filled out a credit card or loan application, you may have noticed that one of the main things that lenders ask for is your income. This is so because lenders want to verify your ability to repay the money you want to borrow from them.

How Does Your Income Affect Your Credit Score?

Although your income does not directly affect your credit score, it does indirectly affect your credit score because if you do not have income, you may be unable to pay off your credit cards and loan accounts. Missing payments on such accounts can cause significant damage to your credit score. A single missed payment can knock down your credit score by over 100 points. The higher your starting credit score, the bigger the drop will be.

Also, you should distinguish between your salary and your income. Your salary refers to the amount of money that you earn from working, and it's usually reported on your W2. However, your salary is only a part of your income. If you receive money from other sources, such as stock or bond sales, rent, child support, or alimony, all of these are considered as income. So, if you're applying for credit or a loan, you should include them as income to improve your odds of being approved.

Does Your Income Affect Your Ability to Obtain Credit?

Now that's we've established that your income does not affect your credit score, you should be aware that your income does affect your ability to obtain credit cards, loans, mortgages, and finance or lease a car. This is so because lenders and creditors use your income to determine whether you have the financial ability to repay the money you're seeking to borrow them. If you do not have the financial ability to pay off your debts, you will likely not be approved. That's a good thing. Because if you're approved for a loan or credit card that you cannot pay off, you may cause significant damage to your credit.

When determining whether to lend you money, many lenders will measure your DTI (debt-to-income) ration. If this ratio is high, they may be unwilling to lend you money. For example, many lenders require a DTI of 36% or less, while others want to see a DTI of 43% or less. Every lender is different, but you should be aware that this measure is used to determine whether to lend you money. So, your income does affect your ability to obtain credit, and this is a good thing to prevent you from falling behind on your payments.

If you were denied credit or a loan because your DTI is too high, you should consider paying down some of your account balances to reduce your debt to income ratio. Another option is to increase your income to reduce your debt to income ratio. If you cannot do either, you should consider looking for a cosigner to cosign your loan. If a cosigner is added, the lender will consider his or her income in addition to yours. That said, the cosigner should be aware that he or she is responsible for payments in the event that you default on them.

What Affects Your Credit Score The Most?

The biggest factor affecting your credit score is your payment history. Your payment history accounts for 35% of your credit score. So, if you want to improve your credit score, the main thing that you should focus on is making your credit card and loan payments on time. Making your payments on time can significantly boost your credit score. At the same time, missing a single payment can cause significant damage to your credit score, so avoid missing payments to maintain a good credit score.

The second factor that has a huge impact on your credit score is your account balances or credit utilization. Your credit utilizations accounts for 30% of your credit score, so lowering the balances on your credit cards and loans is an excellent way to improve your credit score.

These two factors affect your credit score the most and account for 65% of your credit score. So, if you want to improve your credit score, these are the first two categories that you should tackle.

Does Low Income Reduce Your Credit Score?

No, low income does not reduce your credit score because your income is not factored into your credit score, as such having low income will not reduce or lower your credit score. That said, if you have little income and you have credit cards and loan account payments that are due, you might have difficulty making them. You should strive to make your payments on time because although low income does not directly impact your credit score, if you're unable to make your payments, you will cause significant damage to your credit score. So, make sure that you have enough income to continue making your credit card and loan payments on time.

Does Higher Income Increase Your Credit Score?

No, having a higher income does not directly increase your credit score because income is not factored into your credit score. However, if you use your high income to pay down account balances and make your account payments on time, you will indirectly improve your credit score by doing so. If you have any questions or comments, please feel free to leave them in the comments section below.


No Credit vs Bad Credit: Which is Worse?

Whether you're just starting to build credit or rebuild your bad credit, you might be wondering is it worse to have no credit or bad credit? We will answer this question in more detail below.

No Credit vs Bad Credit? Which One is Worse?

Having bad credit is worse than having no credit because with new credit, you have a clean slate on which to build good credit. However, with bad credit, you may have items on your credit report that will continue to bring down your credit score for years to come. So, having bad credit is definitely a much worse situation to be in than having no credit. This is so because when you're starting to build your credit, it is very easy and quick to establish good credit. Within just a few months of making payments on a credit card, you can achieve a credit score in the low 700s. However, if you have bad credit, it will be much more difficult for you to raise your credit score.

If you do not have good credit, creditors and lenders have no way to assess whether you're likely to make your payments on time, therefore, many lenders and creditors will be hesitant to lend you money. That said, there are lenders that are willing to take a risk on those who are just starting to build their credit.

Having no credit is better than having bad credit because, with bad credit, you have probably demonstrated that you've mishandled credit in the past. Therefore, creditors and lenders will be very cautious when deciding whether to lend you money. If they do decide to lend you money, they will charge you an extremely high-interest rate.

That said, regardless of whether you have bad credit or no credit, you will find it difficult to do the following things:

  1. Difficulty being approved for credit cards
  2. Difficulty being approved for loans
  3. Paying a security deposit on a utility account
  4. Payment of higher interest rates
  5. Lower credit limits if approved
  6. Difficulty being approved for a mortgage
  7. Difficulty obtaining housing if a credit check is required

These are some of the things that you may find difficult to do if you don't have credit or have bad credit.

Is Having No Credit The Same As Having Bad Credit?

No, having no credit is not the same as having bad credit. That said, people who have no credit or bad credit face some of the same issues, as discussed above. Nevertheless, they are two different situations. If you have bad credit, that means that you've made some major mistakes when it comes to managing your credit.

However, when you have no credit you have no experience ever managing credit, which makes you risky to lenders and creditors. As such, when you're beginning to build your credit, lenders are very hesitant to lend you large sums of money. When you have bad credit, lenders are also hesitant to lend you money because you've mismanaged credit in the past.

That said, it's easier to build credit when you're building on a new slate vs the situation where you have bad credit and may need to address past issues to improve your credit score. Also, bad credit is more difficult to overcome because you may have to wait for negative items to come off of your credit report for your credit score to improve.

What Do You Need To Have Credit?

So, now that we know that having no credit is better than having good credit, at what point do you have credit and a credit score? To have credit, you must have an open account for a minimum of six months, and the financial institution you have an account with must have reported your account to the credit reporting bureaus.

If you do not have a credit card or loan that has reported the activity to the credit reporting bureaus within the last six months, you may not have a credit score. For those of you wondering, if you do not have credit, you will not have a credit score of 0. Instead, you will get a notification that your credit score cannot be calculated because there is insufficient information in your credit report on which to calculate a score.

On the other hand, if you have bad credit, there probably is information based on which to calculate a credit score, but your score may be very low.

How To Go From No Credit or Bad Credit to Good Credit?

If you have no credit and you apply for a credit card to begin building your credit and you're denied, you should explore the option of opening a secured credit card. The same applies if you have bad credit and you want to open an account to begin rebuilding your credit. In both situations you should explore the option of a secured credit card. Secured credit cards are easier to obtain than regular credit card because of the way they work.

With a traditional credit card, the card issuer is taking a risk by issuing you an unsecured credit card without a security deposit. However, with a secured credit card, the lender is taking little risk because to qualify for the credit card, you must place a security deposit with the card issuer. The security deposit determines your credit limit.

For example, if you want a $500 credit limit, you would place a $500 security deposit with the card issuer, and the card issuer will provide you with a credit card with a $500 limit. If you use the card responsible for six to twelve months, the card issuer may return your security deposit to you and convert your account from a secured credit card to an unsecured credit card.

The great thing about secured credit card is that they impact your credit score just as would a regular unsecured credit card. So, if you make your payments on time and keep a low balance, you will improve your credit score. However, if you misuse the account, you could cause significant damage to your credit because your account status is reported to the credit bureaus the same way a regular credit card is reported.

Frequently Asked Questions (FAQs)

1. Why is bad credit worse than no credit?

Bad credit is worse than no credit because there are probably negative items that are pulling down your credit score. Some negative items may remain on your credit report for years, dragging down your score. However, when you're starting to build your credit, you have a clean slate based on which to open accounts and build good credit.

2. What is the credit score of someone with no credit?

A person who does not have credit will not have a credit score. When a person with no credit checks his credit report, he or she will probably get a message along the lines of there is insufficient information based on which to calculate a credit score.

3. How do you go from no credit to having credit?

You can go from having no credit to having credit by opening a credit card or taking out a loan and making payments on such an account. Within a few months of making payments on your account, you will provide the credit bureaus with enough information which they can use to calculate a credit score for you. As a rule of thumb, you should have an account open for at least six months to gain a credit score.

4. What happens if you have no credit?

If you have no credit, you will find it difficult to open a credit card, take out a loan, take out a mortgage to buy a home, finance a car, or lease a car. There are plenty of other things that you might find difficult to do without credit.