We’ve all been there…derailed by a late payment. In the heat of the moment, it can feel like the end of the world, a gut punch to your credit score that you’ve been working so hard to build. After all, if it’s accurately reported, it can create a significant dip in your score. This can sometimes be over 75 points, depending on your history. But, before you panic, I’m a firm believer in the “time heals all wounds” philosophy. This applies to credit, too! You’re human, you’re going to make mistakes. It will always be how you bounce back from them that sets you and your credit success apart.
So let’s take a look at what you can do next and, more importantly, how to prevent setbacks like this from happening again in the future.
It all starts with awareness.
Like everything else in life, you can’t solve a problem you don’t know exists or that you refuse to look at. In this case, there are many factors to consider, and time is of the essence when it comes to correcting them. What caused the late payment? Did you not receive a statement? Did an auto withdrawal glitch? Was there a mistake with your account number? Call your creditor and talk it over, see if this can be fixed over an error.
If the late payment is accurate and remains on your report, don’t get discouraged. This is as good a time as any to take a closer look at the rest of your credit report. You can look for potential opportunities to gain back points and begin rebuilding. There is always a way forward!
Use credit utilization to your advantage.
One of the biggest contributors to your credit score (at 30%) is your balances. If your credit card balances are high, that’s a sign to credit scoring models that you might be stretched financially thin. The goal is to keep your balances at or below 10% of your total limit. For example, if you have a $5,000 limit across your cards, try to keep your total balances below $500. This is one of the quickest ways to positively impact your credit score after a setback!
Don’t jump to closing old accounts.
Sometimes, when we get financially overwhelmed, our immediate impulse is to cut it all off and close old cards. But the credit game doesn’t work that way, and doing this can actually backfire. Closing credit accounts can hurt your score and reduce your total available credit. So closing accounts can negatively affect your score, versus help it.
I recommend keeping your accounts open, even if you’re currently not using them frequently. If there are cards you haven’t touched in a while, consider putting a small recurring charge on them and paying it off monthly. Why? Inactive accounts don’t report new activity. Using a card, even occasionally, allows it to update your report. And yes, this move comes with perks! A card that reports a small balance and gets paid off on time shows that the account is in good standing with positive activity. No balance? No new data on that account.
Final Thoughts
I understand how frustrating it is to get knocked down by a single late payment. Trust me, I was once there too. I didn’t even realize that small missed payments, like a $25 minimum store card, could hurt my credit so much until it was too late. That’s what sparked my journey into credit coaching (a testament that something beautiful can come from mistakes!). I wanted to not only create a better life financially for myself and my daughter, but also for others who were never told what to look for or how to manage their credit effectively.
No matter how defeating it can feel right now, it’s never a dead-end road. Healthy credit is a journey, meaning it takes time, patience, and consistency. It will sometimes feel like your small efforts are hardly making a difference at all. Start with the small steps you can control, like lowering balances, keeping accounts open, and reactivating dormant ones. The credit game rewards consistency, and time will heal even the biggest hits! You’ve got this.
Looking for more advice on how to play the credit game?
Check out my website: https://www.jeannekelly.net/
Tune into the podcast: https://www.jeannekelly.net/podcast/
Follow over on Instagram: @creditjeanne
