Credit Building

How do missed payments affect your credit score?

Sep 13, 2022

If you’re searching for this topic then it’s likely that you, or someone you’re close to, has recently missed a payment. And now you may be left wondering how this impacts your credit file. So we’ve broken down what ‘missing a payment’ means for you and your credit score.

We know that life can catch us off-guard sometimes, and that late payments can just happen every now and again. So treat this information like a safe space for you to know your facts and feel less anxious about your finances.

How do missed payments affect credit scores?

Your credit score is a reflection of how your credit report is looking. It also includes things like who you’re financially linked with (e.g. people you have joint accounts with), whether you’re registered to vote, and how many hard checks happened on your credit file in the past six months. But most importantly, it includes the evidence of how you use credit.

This is your credit history. And lenders use this information to help them decide to lend to you, or not. So if your credit history contains any missed payments, it’s likely that will reflect negatively on your credit score.

If a lender decides not to lend to you, it can feel like a personal judgement and that the whole credit score system can seem unfair at times. But the decision probably doesn’t rest with the person at the car finance company, and is much more likely to be a computer algorithm measuring the risk of lending to you based on your credit report.

Imagine a stranger needs to borrow your car. Before you hand the keys over, would you feel more comfortable if they showed you a history of evidence that they have borrowed cars before and returned them safely in the past?

We know that it’s difficult to do, but if you are ever declined credit, try not to take it personally and channel your energy into improving your credit history over the next six months or so instead.

I know I missed a payment, so why isn’t it on my credit report?

You have three credit reports, one from Equifax, Experian and TransUnion, respectively (you can read more about these three main credit reference agencies here).

And within those reports, you’ll see the number of credit accounts you have open, like loans, credit cards, utility suppliers, and phone providers will show on your credit reports.

A loan repayment company may only report to TransUnion, and your credit card company might report to Experian and Equifax. It can be difficult to know which of your credit reports it will show on, so keep an eye on all three.

Why it’s important to avoid missing payments

It’s important to keep up with the payments that you commit to paying. A long and healthy credit history (the evidence of you borrowing credit and repaying it on time) usually leads to you being offered better interest rates on loans, mortgages and credit cards.

We mean seriously great rates. You could save £1,000s in the long run!

Not only that, but if you miss too many payments, the company you owe money to may choose to default your account. And if you still don’t settle the debt then it can lead to a more serious CCJ (County Court Judgment). These will show on your credit report, but if it does get to this stage, it’s still important to pay back any money you owe.

If you’re struggling to pay bills, it’s worth contacting the company directly as they may be able to offer you a more affordable repayment plan.

Does missing a car or credit card payment affect my credit score?

In terms of importance, missing payments for any financial agreement you have taken out does matter! It doesn’t matter whether that’s a mobile phone bill, your credit card’s minimum charge for the month, or a car loan payment – they all count.

We hate to be the bearer of bad news, but any type of missing payment can negatively affect your credit score, even if it’s just once.

How long will a missed payment stay on my credit file?

There’s no pretty way to say this, so we’ll get straight to it because we know you want your credit score to be in the best place possible. If you miss a payment it’ll stay on your credit file for six years. We know — most people’s knee jerk reaction to that is “yikes”.

It can feel deflating to think that a mark has been left on your credit file. Especially if you’ve been working really hard to build your credit history.

There is light at the end of the tunnel though! Read on.

How long do missed payments affect your credit score?

The good news is that missed payments matter less and less as time goes on. That’s because lenders tend to be more focused on the recent evidence of how you’re handling credit.

If you have found yourself with a missed payment on your report, the best thing to do is to stand up straight, take a deep breath and set off on the road to repairing your report.

Concentrating on building a fresh history of positive evidence credit. Loqbox is here to help you to build your credit the easy way — just by saving, spending or renting.

‘But I can explain…’

We 100% get it — life is not a one-size-fits-all checkbox! We know that, and you know that too.

You could have found yourself missing payments due to an extreme circumstance, such as facing a sudden redundancy or a serious illness that stopped you working. In instances like that, you can ask Equifax, Experian and TransUnion to add a notice of correction to your report.

This will allow lenders to see the reason why you missed your payment and they may take that into account when deciding to lend to you.

My reason wasn’t that serious, what else can I do?

If you can take accountability for past mistakes and put your best foot forward, then well done you — it really does take a level of maturity that some people never master. So give yourself a pat yourself on the back, finish that slice of humble pie and follow this simple mantra to get back on track:

The sooner you start rebuilding your credit history, the sooner any past mistakes won’t matter anymore.

Responsibly make your payments and show a whole lot of patience, you’ll be on the road to recovery in no time.

If you’re struggling with debt

On a serious note:

If you are facing the stress of continually missing payments and debt is getting you down, then our friends at StepChange can likely help you. They are a debt charity based in the UK who offer judgement-free advice and support to those in need.

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