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. Most mortgage lenders allow a grace period after the payment is due. 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 that’s not ideal is an understatement, as payment history is one of the main 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.
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