How Does Missing a Rent Payment Impact Your Credit Score?
From time to time, we all have unexpected expenses like car repairs, medical bills or replacing a phone or laptop. If you're short on funds, don't put off paying your rent to cover these expenses. Late fees add up and missing a rent payment can significantly impact your credit score.
By law, your rent is due on the date that's specified in your lease. There's usually a grace period of five days, so if you pay your bill just a few days late, you probably don't need to worry about it. Most landlords impose a late fee of five to 10 percent and report late payments to credit agencies after 30 days past due.
How low can you go?
One late payment reported to credit agencies can drop your score significantly. And, the higher your score, the more impact a missed payment can have. A study about credit scoring conducted by FICO suggests that a late payment can cause as much as a 90- to 110-point drop on a credit score of 780 or higher. And score drops from late payments can remain on your credit report for seven years.
If you've been paying on time for a long time, your landlord will likely forgive one late payment, so don't be afraid to call and explain your situation. If you're sincere and apologize, you may be able to ask for an extension, offer a partial payment and persuade them that it won't happen again.
Give your landlord assurance of your plan to pay and you may be able to stop them from reporting your late payment. If you've missed a payment and confirmed that it has lowered your credit rating, see if you can convince your landlord to remove the ding from your credit report.
Check your score
It's important to check your credit score annually so you can stay up to date on where you stand, if you have any significant changes and to ensure no one is hacking your credit.
You can request and view your credit history online or have a copy mailed to you. To receive a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian and Trans Union), visit www.annualcreditreport.com or call the Federal Trade Commission at 1-877-322-8228.
Stay on track
You can schedule payments for each month to automatically be deducted directly from your bank account. This will keep your payments on time and you'll never have to pay late fees.
Be sure that you have the funds available in your account prior to the date the funds are withdrawn. Set up electronic alerts with your bank so that you receive an email or text reminder that lets you know the balance and when your payment is scheduled.
If you'd rather not use automatic payments, use a calendar or online reminder to keep track of your payment schedule. Most rent is due at the beginning of each month, so set an automatic reminder for the last week of the month.
In summary, befriend your landlord, pay on time and save your money so that you avoid future credit issues.