Question about late payments and credit score

Factual Questions
1

I am getting ready to buy a car. I have been subscribed to a credit monitoring service for several years, and have had excellent credit (above 750) for several years, with no negative history at all.

I logged on this afternoon to check my credit, before talking to the dealer. I discovered that I had somehow forgotten to pay a $34 bill on a Bank of America credit card in December, and the account was now listed as 30 days late.

This was totally my fault, I was traveling and somehow overlooked it. In fact, I’ve already paid the January bill, without even noticing that it included a past due balance, but this payment is not reflected on the credit report, which shows the account as currently 30 days delinquent.

As a result, my credit score is now lower by over 100 points, down to about 630. I assume this is because that account shows as currently delinquent?

My question is, now that the account is current again, how much will this single 30-day late payment affect my credit score in the future? Hopefully it will go up next month when the account no longer shows as currently delinquent, but the late payment will still be in my “payment history” for several years.

My credit monitoring service has a “credit score simulator”, which seems to indicate that my score will increase by about 40 points after 2 years (this would still be down by about 70 from where it was last month). Is that for real? I can’t imagine a single late payment would permanently knock 70-something points off my score.

I called Bank of America to ask if they could remove the late payment from their reporting as a courtesy, and they said they could not, because I had previously had a late payment in 2007 (not so late as to be reported, apparently, I assume it just arrived in the mail a few days late). Assholes.

This whole system is so fucked up. My credit score drops 100 points because I forgot about a $34 payment on a credit card I never even use, while I continued to make payments on about $2,000 / month in other things and have never had a single other negative report.

2

OUCH!!! That’s nuts :(.

I don’t know how slowly it’ll recover (though two years, with such a small recovery, after a single late payment, sounds extreme).

Do you need that BofA card? Can you threaten to take your business elsewhere if they won’t remove the derogatory?

FYI, Bank of America’s website does have a way to set up to autopay the minimum on the due date, if you do keep the card. We have ours set up (and as I’ve told here before, they screwed that up one time by sending me a new card with a new account number, but not transferring that autopay option… I would have left them then if they hadn’t backed out the fee / interest / penalty rate).

When you do go for a car loan, consider joining a credit union. They’re more likely to look at the whole picture vs. a single score.

3

I used to look into FICO scores a great deal for another reason:

  1. As far as the ding you will take - Well about what it has now - and don’t expect it to get much better over time - I would guess you will probably see a small bump after it reports as current - and then a gradual increase over the next 6 years 10 months. It absolutely wouldn’t surprise me if you have a 70 point ding two years later. In fact - I would be surprised if even five years from now - you weren’t getting dinged at least 40 points for this.

Keep in mind that your story doesn’t make 100% sense unless you were very unlucky. If you pay your bills by the due date - you are only dinged if you are 30 or more days past due - so you would have almost certainly had to have missed two payment dates - unless they are dinging you for being exactly 31 days late.

I don’t remember the percentage, but this little fact means that quite a few people (I think it is more than 50%) have no missed payments at all on their credit report.

You say that you have had excellent credit for several years - is this cause you are young - most people with scores around 750 plus have 7 + years of good data. If you are young - the ding might hit you harder (but not harder than it has) than others - as there is less data to work off of.

  1. As far as how good you are on other stuff - none of that matters as much as you would think. Some stuff is just silly - the credit reporting companies claim paying off your debts will help your score - but from what I have seen - this BARELY helps - they score people that have closed (by the lender for being 90+ days late) almost the same as those that actually pay the account off. I saw one person that paid off three bad debts whose score increased a whopping 1 point (yes one) when the new data hit.

One that can help that most people don’t realize - if you are applying for a loan and know about it a couple months or so before you do - make sure you pay your credit card bills BEFORE the billing date - not the due date. Even if you pay off in full each month - they report the amount you owe bassed off of what you see on the bill - not what you paid. So by the time the bill is sent - it makes it look like you owe more than you do (in most cases).

For example - if you have a 5,000 limit on a card - and each month - charge 3,000 for the points - but pay it off each month - it still shows up as you owe 3,000 - this makes your utilization score around 60% - this is BAD. You have to pay this before they cut the bill - this can help your score by sometimes 50 - 100 points or more.

You want to keep that number under 10%. I have experimented with this a great deal - and this matters much more than most people realize. They seem to suggest under 20 is all you need (or at least used to), but I know my score would go up all the way down to under 10% utilization for 2 of the 3 major ones. I know other this has helped as well.

4

I feel your pain, OP. I’m a prime example of how fucked up the system is. I avoided debt in my younger years, and as a result, I can’t get approved for credit anywhere.

I have a good salary, pay all my bills, no negatives yet my credit score stands at 604. I’m still deemed high risk and can’t even get approved for a freaking Target card. AT&T would not let me buy an iPhone unless I paid $800 dollar deposit because of my credit.

And this is after I financed a car loan (had to get my dad to cosign) and paid $200 to get a crappy small credit card. I’m seeing a 10 point increase about every 1-2 months so at least I’m heading in the right direction.

On the other hand, my GF who has 50K in credit card debt can get approved for credit within seconds. So unfair!!

5

The effect of the late payment in your credit score is not permanent, and you can improve it again.

6

Did you actually pay to get the card (as in paid a fee)? or is it a secured credit card?

If the former: those subprime, pay-to-receive cards are scammy on a number of levels, watch your statements and credit reports VERY carefully while you have that card. And as soon as you can, get one that is NOT that type - a secured card if you need to, or you can ask your father to add you as an authorized user on one of his: that has to be a real authorization as in you have a card, they’ve rightfully cracked down on the sort where you can add any stranger to your account, they don’t have access to it for real.

In your situation vs. your girlfriend, the reasoning is that she’s shown she can make payments on various types of accounts. The amount of indebtedness counts against her, but apparently not as much as your lack of history. Yeah, it’s counterintuitive.

There are supposedly lenders who are better at looking at the whole picture (no debt, decent income) when making credit decisions.

7

I remember a credit card company telling me once that the due date was the proverbial 30 days. 1 day late is 30 days late. It’s in their interest to ruin your score, because they can jack up your interest with a ruined score. Maybe this was her misunderstanding and I was later than I thought I was, but it has colored my impression of credit card companies ever since.

Do they care about utilization of individual cards or total utilization? The latter seems to at least have some kind of sense.

8

It’s the total utilization that counts. This is why it’s beneficial to open up credit accounts that you’ll never even use. I have at least 6 open lines whose cards are in a landfill somewhere. Macy’s, Sears, Capital One, etc.

Second, your delinquency balance does matter. So if you’re late on $30, it’s a hell of a lot different than $2,000. So the system is sensitive to which bill you’re not paying.

Finally, I recommend that everyone dispute every single negative thing on your credit report. If they want to ruin your reputation, let them prove it. Often times, they won’t even bother with it and Equifax et al. will take your word over theirs. It’s not even hard to do- just go to their websites. Dispute, dispute, DISPUTE!