This 1 mistake took 140 points off my credit score

0

Image source: Getty Images

Recently, I made a big financial mistake. I lost track of my bill payment schedule. And, as a result, I ended up missing a mortgage payment.

I wasn’t just a little late either. More mortgage lenders allow for a grace period after the payment due date. This grace period is generally around 15 days. Unfortunately, I didn’t realize my mistake until well beyond that time. In fact, my payment was due on November 1, 2021, but I didn’t finally send the payment until January 11, 2022.

Needless to say, my mortgage lender wasn’t exactly happy about the delay. And my payment was late enough that my delay was reported to all three major credit reporting agencies. To say it’s not ideal is an understatement, as the payment record is one of the key factors determining your credit score.

While I knew my score would take a hit, I was surprised how much a single late payment affected my otherwise stellar credit report.

A late mortgage payment dropped my credit score by 140 points

Prior to the mortgage incident, I had been responsible for more than two decades of paying my mortgage payments — and other debt payments — on time. As a result, I had obtained a credit score that fluctuated between 830 and 836. Since credit scores can vary from 300 to 850, this was considered an excellent score.

Unfortunately, after my mortgage lender reported my late payment, my score dropped to 700. While this is still considered a good score, it is well below the highs I had reached prior to my mistake.

Now, part of the reason my score has gone down so much is because it was so high to start with. When something in near-perfect condition has a flaw, it will stand out more. If I had ever had a lower score due to missed payments or other issues, the credit score formula would expect irresponsible borrowing behavior on my part. Adding another late payment to the list wouldn’t have such a big impact because it wouldn’t be so unusual.

But, since paying late was not in my character, it suggests that something has changed in my financial situation that makes me a less reliable borrower. The sharp drop in my score sends a red flag and warns lenders to be a little more careful before doing business with me.

How to Fix – or Avoid – My Big Mistake

The good news is that I intend to correct the situation now that I have realized the error.

First and foremost, I will call my mortgage lender to ask if they would be willing to work with me.. Since I have a long and solid history of paying on time, I plan to ask my lender if they could overlook my mistake and remove the record from my credit report.

While there’s no guarantee my mortgage lender will agree to waive late fees or stop reporting my late payment, it’s common for creditors to do this for good clients who make a simple mistake. It’s always worth asking, and in fact, if the first customer service person I talk to turns me down, I’ll probably call multiple times to try my luck with another rep.

In the future, I will also be setting up automatic mortgage payments from my bank account. This will ensure that I never lose track of my bills again, so I don’t see any further impact on my credit rating. If you have a mortgage – or other debts to pay – and you’re sure that automatic payments won’t end up overloading your bank account, this can be a good solution.

By taking these steps, I hope to get my credit score back into the 800s as soon as possible. And if you have your own loans, you can learn from my mistake and hopefully avoid damaging your own credit.

Alert: The highest cash back card we’ve seen now has 0% introductory APR through 2023

If you use the wrong credit or debit card, it could cost you dearly. Our expert likes this first choicewhich includes a 0% introductory APR until 2023, an insane reimbursement rate of up to 5%, and all without annual fees.

In fact, this map is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Share.

About Author

Comments are closed.