What Happens if I Can#8217;t Pay my Credit Card?

When you can#8217;t pay a credit card, it can come with consequences such as late fees, increased interest and a potentially negative impact on your credit score.

If you believe you#8217;re in a situation in which you can#8217;t pay a credit card, one option is to contact your credit issuer first. They may be able to advise you on a payment plan or provide other resources. If you do miss a payment, below are a few things to expect.

Impact of a Missed Credit Card Payment

When you don#8217;t make the minimum payment by the payment due date, the first thing you will see is a late fee on your account in the form of either a percentage of your balance, or a fixed dollar amount of up to $37. Your interest rate may increase after a missed payment, as well.

Missing a credit card payment can lower your credit score. Issuers generally submit account notices every month to the major national credit bureaus. Payment history is an important component of your credit score, and is therefore a critical thing to consider if you want to maintain or improve your credit score.

Generally, if you don#8217;t make a monthly payment for six consecutive billing cycles, it may result in a charge-off. This would be reflected in your credit report and will usually remain on the report for about seven years. At this point, and sometimes even earlier, your account may be placed with a collection agency or attorney, which means the collection activity on your debt will be from the collection agency or attorney and not from the issuer.

What Can You Do about a Missed Payment?

You should submit your payment as soon as possible to try to minimize any impact to your credit score.

If you can#8217;t pay your credit card, one of the best things to do is call your card issuer and explain the situation. Maybe you#8217;re facing a difficult financial situation, such as a job layoff or some unexpected medical expenses. Whatever it is, let your issuer know and they might be able to work with you on a repayment plan or offer other assistance.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

missed payment credit score

Missed payment credit score

Penalties, fees, increased interest rates, lost points, and a huge hit to your credit score are all things that can happen from a missed payment on a credit card. The number 1 rule is making sure you can pay your bills, in full, and on time.

Well, what happens if well#8230; life happens? We get busy, we miss an email, or frankly just forget to make a payment. The good news is that not all is lost. Rick forwarded me an email from Megan about an experience she recently had with Barclays after emailing with Rick about some advice on what to do.

She noticed a big dip in her credit score, realized she had missed a payment, and wanted to know what to do to get the 30 days late payment removed from her credit report. I#8217;d like to share the story here and make a couple of points, so here we go:

In November 2012 I opened the US Airways Dividend Miles Mastercard. I signed up for paperless statements. (Funny thing is that this would never have happened if just kept paper statements and not gone paperless.)

I am not sure how this happened, but I missed the email that was sent in December when the statement was ready. The statement amount was $12.00. And by an odd turn of events I also missed seeing the next email about the statement in January as well. You don’t know me, but this is very uncharacteristic for me. I am very much on top of my finances. When I finally paid the bill in February, it was $54.00 with the late fees and interest. I was OK paying those extra charges, I was just worried about my credit score. I logged on to my CreditKarma and CreditSesame accounts and found out my score had dropped 50 points.

I called Barclays immediately after figuring out what had happened. Turns out that they had only reported the issue to the credit bureau in February, just 3 days before I called them. You have to have missed a payment for 30 days before they report it. I learned something. Anyway, that agent on the phone couldn#8217;t help me that day, but I called back and asked to talk to a supervisor and find out if there was anything I could do to get the late payment reversed. They said I could write to the Barclays Credit Bureau Disputes department and make a request which I did.

Sure enough, I received a letter about a month later saying that they would remove the late payment and that it would take 30 days for the change to take effect. Also, I noticed that after just a month my credit scores had rebounded 30 of the 50 points. Whew.

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10 Surprising Ways to Negatively Affect Your Credit Score

Missed payment credit score

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A credit score is supposed to be about how you handle credit, so it seems counterintuitive that non-loan actions can bring your credit score down.

Unfortunately, the reality is that even if you aren’t borrowing money, you could still be hurting your credit score. Here are 10 actions that can bring down your score even though they have nothing to do with applying for or receiving credit. (See also: Surprising Things That Can Kill Your Credit)

Even though Experian recently started reporting on-time rent payments on consumers’ credit reports, you probably aren’t going to get credit score brownie points for paying the rent right when you should.

Don’t let that fool you into thinking that you can skip rent payments or pay your rent late on a regular basis without a negative impact on your score, though. If your landlord decides that he or she is sick of your slow payments, you can be reported to the credit bureaus.

On top of that, your landlord can ask a collection agency to attempt to collect on your delinquent payments. Once that happens, the credit bureaus find out and report it. Now your non-credit rent payment is dragging your credit score lower.

2. Failure to Pay Medical Bills

With the rising costs of health care, even those with health insurance can find themselves facing high medical bills. Don’t ignore these bills, though. Health care service providers can decide to report your unpaid bills to the credit bureaus or send your account to collection. Collection accounts look especially bad on a credit report.

Many hospitals and other health care providers are willing to work with you on large bills. If you can pay a large portion of the bill immediately, you might be able to get a discount on your health care. Or, if you can’t pay a large portion, you might be able to work out a payment plan. Realize, though, that you might be charged interest, or a fee, for a payment plan.

For many people, the idea that a $5 library fine could be harmful to their financial situation seems silly. However, not paying could cost you even more than what you owe. In order to collect more money and help ease strained local budgets, some libraries have been sending unpaid fines to collection agencies.

Once your library fines go to the collection agency, it appears on your credit report. On top of that, the collection agency might add its own fees to the fine. Your $5 library fine could easily balloon into a $20 or $30 cost and bring down your credit rating on top of it all.

Your unpaid back taxes aren’t just a matter between you and the government. If you end up racking up unpaid taxes, the government can place a lien against you. A tax lien is one of those public records items that appears on your credit report and can drag down your score.

A tax lien can be especially aggravating, since it will remain on your report for up to 15 years.

5. Miss Utility Payments (or Don't Completely Close Accounts)

Utility bills represent another of those non-credit payments you make regularly that aren’t likely to help your credit score. While there are alternative credit reporting agencies that you can ask to collect information on your utility payments, the credit scores that most financial services companies look at don’t include on-time utility payments.

However, like medical bills and rent payments, if you habitually pay late, or miss a payment altogether, the utility company can report your delinquency to the credit bureaus and turn your account over to a collection agency.

This happened to me once. When I moved from New York, the final bill slipped through the cracks. I didn’t realize I wasn’t up to date on the account until I got a collection notice a year later and I doubled-checked my records. My credit score headed temporarily lower on the news.

Make sure you pay your utility bills on time. And, if you move, make sure you are completely settled with the company. Even an address forward might not be enough to catch all your final bills; 30 days after your move, call the utility companies and make sure everything is squared away.

6. Buy a New Cell Phone (or Sign Up for Utilities)

Increasingly, cell phone providers are checking your credit when you sign up for a contract. In some cases, the company performs a soft inquiry, and your score isn’t damaged. Other times, though, the provider runs a hard credit check. It looks as though you are applying for credit even though you don’t think that you are.

These types of hard credit inquires can weigh on your credit score, pulling it down. A similar effect can be seen when you sign up for cable or satellite TV services, as well as for Internet service. When you sign up for a new telecommunications service and the company asks if they can run a credit check, ask if it’s possible for a soft inquiry instead of a hard inquiry.

Not all financial institutions check your credit before you open an account, but some banks and credit unions do. Indeed, one of the reasons that your checking account might be denied is due to your credit report.

Once again, you need to find out whether the bank is performing a hard credit pull or a soft credit pull. A soft pull isn’t going to bring your score down, but if the bank performs a hard inquiry that looks like you are applying for credit (even though you are just trying to open a checking or savings account), it could ding your credit score.

8. Cancel Your Gym Membership Improperly

Many consumers choose to pay for a monthly gym membership automatically using an automatic withdrawal or putting the monthly fee on a credit card. This streamlines the process, but it can also cause problems down the road if you aren’t careful.

Gyms often have cancellation procedures that you are supposed to follow, usually involving paperwork. If you don’t fill out the paperwork to cancel, but contact the credit card or the bank to stop allowing the automatic payments, you could find yourself in trouble.

Your gym might report it as non-payment to the credit bureaus. Additionally, your account could be turned over to collections. Even if you don’t have an automatic payment arrangement, some gyms might take these actions if you don’t fill out the appropriate cancellation paperwork.

When you sign your gym membership agreement, make sure you understand what actions you need to take in order to cancel your gym membership and find out what the gym will do if you don’t follow proper procedure.

Are you a traffic scofflaw? If you have unpaid parking tickets or you ignore speeding tickets and other violations, your credit score could suffer. Not only will city and state governments add more penalties the longer you ignore your tickets, but they could decide to report them to the credit bureaus as debts. And, of course, there is always the risk that a collection agency will get involved.

Don’t think that a violation in another state can be safely ignored, either. Whenever a ticket is written out, your license plate number is recorded, and it is run. They know who you are, and they aren’t afraid to report you. It may take a little longer, but unpaid tickets will eventually catch up to you.

10. Close Unused Credit Accounts

When you aren’t using your credit accounts, it makes sense to close them, right? After all, it’s not like you are borrowing money with those accounts anymore. Unfortunately, closing those unused credit accounts can have a negative impact on your credit score.

First of all, those credit accounts are contributing to the amount of credit you have available. Because your credit utilization and available credit matters to your credit score, you want to show that you aren’t using up as much of credit as you could be. Once you close those unused accounts, you suddenly have less credit available. And, if you occasionally carry a balance on your other cards, your credit utilization has increased.

Next, you have to consider the length of your credit history. The older your credit accounts, the better it is for your credit score. Your credit accounts have an “average age,” and if you close your older accounts, you could find yourself with a shorter credit history. The result could mean a lower credit score.

Before you close an old, unused credit card, reconsider. Think about how long you’ve had the account, and how it has been helping your credit history length.

Most Financially Related Actions Affect Your Credit Score

Even when you aren’t borrowing money, your financial actions can impact your credit score. Missing a utility payment or skipping out on a library fine might seem like no big deal, but if you don’t take care of it, and let it sit, the end result can be a lower credit score.

How Much Does a Late Payment Hurt Your Credit Score?

Missed payment credit scorePaying your bills on time each month is one of the most important ways to manage your credit score, not to mention an essential part of being financially responsible. But if you have made some payments after the due date in the past, you may wonder if that’s going to affect your credit score. The answer is: yes.

Any missed payment − from parking tickets to medical bills − could drop your credit score by 100 points or more. Many factors are used when determining your credit score, but payment history is the largest and makes up 35% of your score. Since lenders use your credit score to decide if they will lend you money or give you credit, the logic is that how you have repaid your debts in the past is a good indicator of how you will pay your bills in the future.

But not all missed payments are equal when it comes to your credit score. The impact that missing a payment has on your score depends on a variety of factors.

What Was Your Credit Score Before the Late Payment?

If you had a high credit score before the missed payment, then the reduction in your score will be higher than if you had mediocre or poor credit. 700-plus scores can be dropped 100 points or more with a missed payment.

Since the creditor cannot send the late payment information to the credit score agency before it is 30 days late, payments must be at least 30 days late to affect your score. Occasional late payments between 30 and 60 days late do not typically cause lasting damage to your score, once they are paid and no longer reported on your credit report as outstanding. But a pattern of bills paid 30 to 60 days late will have a negative impact.

A missed payment over 90 days late will cause your score to take a big hit. One 90 day late payment will damage your credit for up to seven years.

When Did the Missed Payment Occur?

MyFICO.com, the consumer division of FICO, lists how recently the late payments occurred as one of the criteria for factoring them into your credit score. “So this means that a recent late payment could be more damaging to your FICO score than a number of late payments that happened a long time ago,” the website states.

Was the Payment Charged Off or Sent to a Collection Agency?

When a bill is significantly overdue, a company will send the bill to a collections agency. Another option is that that the company will “charge off” the payment, writing it off as loss because it is uncollectible. According to myFICO, “If you continue not to pay your debt and your creditor either charges it off or sends it to a collection agency, it is considered a significant event with regard to your score and will likely have a severe negative impact.”