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Most of us have known at some point the creeping realisation, slowly dawning on us, that we have forgotten to pay our credit card bill on time.
Or perhaps seen the ‘red bill of doom' lying on the doormat when we come back from holiday, to tell us that the gas bill is overdue. Some may find that their regular mortgage payment was rejected due to lack of funds.
But what are the truth and myths about missed or late payments? And just how do they affect your credit rating?
The first thing to note is that missed payments are recorded on your credit report for at least six years.
Court Judgments for non-payment of debts, IVAs and bankruptcies also stay on your credit report for at least six years and also can be seen by lenders.
Why is that so? It's because lenders want to check your credit report to judge for themselves whether or not they think you are likely to keep up payments on any credit they give you.
If they see late or missed payments on credit agreements with other lenders, they may worry that you might miss payments to them too. They want to be sure that you aren't taking on more credit than you can comfortably manage.
To avoid any missed payments in future, keep a close eye on your finances the easy way with financial management software from Money Dashboard.
Even if late payments can affect your credit score, it needn't stop you from getting credit. You could still be eligible for credit, but it may cost you more to do so as the most competitive deals may now be out of reach.
A single late payment won't do you any good but it needn't be the difference between getting a deal or not. Credit scores weigh up lots of different pieces of information and if everything else on your report and application form is in your favour, it may not be an issue. It is best to make sure that you don't miss any further payments from then on.
It's probably true to say that most lenders focus on your most recent payment history. A solitary missed payment from over a year ago is probably unlikely to worry them very much.
It is worth considering checking out your Experian Credit Report with a free 30-day trial of CreditExpert* to get an idea of how lenders are likely to rate your credit report.
*New members only. Monthly fee applies after free trial. Free trial period starts on registration further ID verification may be required to access full service, which may take up to five days.