When it comes to credit reporting, how late is late?

This post originally appeared October 8, 2015 on CreditCards.com as “How late payments get reported to credit bureaus“

By Barry Paperno

Dear Speaking of Credit,
If you are two or three days late on a payment, and you are trying to get a home loan, will the bank look at this? This is an every month thing after the due date. — Joseph

Dear Joseph,
If you’re only a few days late, or even 30 days late with that payment, you’ll be glad to know your mortgage lender won’t be aware of it. That is, the fact that you paid after the due date won’t appear on your credit report or affect your credit score as a delinquent payment. You are, however, charged a hefty late fee anytime you miss the due date, as you might already know all too well if indeed “this is an every month thing.”

So, just how late does a late payment have to be before showing up on your credit report as a delinquency? There are two key dates each month that determine when a late charge is assessed, a payment is considered past due and when the account is reported — whether positively or negatively — to the credit bureau: the due date and closing date.

Due date
This is the date, typically about 25 days after the prior closing (or statement) date, by which your minimum monthly payment must be received to avoid a late fee, and is most likely the date you’ve been missing by a few days each month. Yet despite consistently paying after the due date and incurring a late fee, your account has probably been reported to the credit bureaus as “current.” That’s because the designation of a past-due payment for late fee purposes is different from the guidelines for reporting an account as past due to the credit bureaus.

Closing (statement) date
The closing (or statement) date falls on the same date each month and marks the beginning and end of the time frame for all account activity, such as charges, payments and adjustments, to be recorded onto the monthly statement. While a payment made after the due date and before the next closing date, as you’ve been doing, won’t appear as delinquent on the next statement, the late charge will. If the payment not only misses the due date, but also the next closing date, the statement will indicate that payment as past due.

Reporting to the credit bureaus
Each month, information such as the card’s balance, credit limit and payment status is taken from your latest billing statement and reported to the credit bureaus on or shortly after the closing date. This information is then used in the calculation of your credit score the next time it’s requested. But what’s not always reported to the credit bureau each month, though it may be reflected on your statement, is the past due status of the account. As such, your statement could show a past due payment at the same time the account is reported to the credit bureaus as current.

To address your question more specifically, an account is reported to the credit bureaus as past due when the minimum payment for one month fails to be made by the second closing date following the initial due date. In other words, not only do you have to miss the first and second due dates, but you also have to miss the closing date following that second due date.

Sound confusing? If so, the following scenarios should help illustrate how due dates and closing dates can determine the reporting of an account’s payment status to the credit bureaus, which, considering that payment history makes up about 35 percent of your FICO score, can mean the difference between future credit approval and denial:

HOW CLOSING DATES, DUE DATES AFFECT CREDIT WHEN PAYMENTS ARE LATE
A FEW DAYS LATE: Payment due Jan. 25 is made Jan. 28
Date Jan. 1 Jan. 25 Jan. 28 Feb. 1
Event Closing date Payment due Late payment received Closing date
Credit consequence Statement shows account current; next payment due Jan. 25; account reported to credit bureaus as current. January payment not received; late charge assessed. Account now considered current. Statement shows account current; next payment due Feb. 25; reported to credit bureaus as current.
LATE: Payment due Jan. 25 is made Feb. 2
Date Jan. 1 Jan. 25 Feb. 1 Feb. 2
Event Closing date Due date Closing date Late payment received
Credit consequence Statement shows account current; next payment due Jan. 25; account reported to credit bureaus as current. January payment not received; late charge assessed. Statement shows account 30 days past due; next payment due Feb. 25; reported to credit bureaus as current. Account now considered current.
VERY LATE: Payments due Jan. 25 and Feb. 25 are not made until March 2
Date Jan. 1 Feb. 1 March 1 March 2
Event Closing date Closing date Closing date Late payments received
Credit consequence Statement shows account current; next payment due Jan. 25; account reported to credit bureaus as current. Statement shows account 30 days past due; next payment due Feb. 25; reported to credit bureaus as current. Statement shows account 60 days past due; next payment due March 25; reported to credit bureaus as 30 days past due. Account now considered current.

To summarize the message in these examples, as long as you can keep from missing more than one payment in a row, not only will your account consistently be reported to the credit bureaus as having been paid on time, but your score will continue to look favorably on your recent payment history and your mortgage lender will be none the wiser.

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