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How to Rebuild Your Credit After a Missed Credit Card Payment

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If you’ve missed your credit card payment deadline by a day or two, don’t panic. A lapse of just a couple of days won’t affect your credit score. You might even be able to get your credit card issuer to waive your late fee if you’ve been consistently on time with payments.

But if it’s been 30 or even 60 days since you made a payment, there’s reason to be concerned. This delinquency will likely be reported to the credit bureaus, and payment history is a large part of how the bureaus calculate credit scores.

Here is a look at how you can rebuild your credit if you’ve missed payments to your credit card and how to limit the damage as much as possible.

What Happens When You Miss a Credit Card Payment?

If you have failed to make a credit card minimum payment for more than 30 days, card issuers generally consider that a missed payment. Creditors vary on when they will alert credit bureaus about the missed payment, but it’s a safe bet it will be reported by the 60-day mark.

Once the missed payment is reported to one or more of the three credit bureaus, the credit scoring companies – FICO and VantageScore – will include that data point in their score calculations. The effect could be dramatic. It’s possible that your credit score could fall by more than 100 points from a missed payment, says Bruce McClary, senior vice president of communications for the National Foundation for Credit Counseling.

“The impact depends on where you are when you take the hit to your credit score,” McClary says. “If you have a top credit score, the fall could be farther than if you’re already dealing with a subprime credit score.”

For example, if you have a score that’s more than 700 points – which is generally considered a strong score – the drop could be up to 100 points, he says.

This isn’t the only penalty you’ll face because of a missed payment. You’ll likely be charged a late fee, and your interest rate could go up, which is especially costly if you have a low introductory interest rate.

If you fail to make a payment after the 90-day mark, “your credit score takes an additional hit,” McClary says. The issuer will add more fees on top of the interest you owe and “now it’s cost-prohibitive for you to catch up.”

Once a missed payment moves into the fourth month, creditors usually write off the debt and sell it to a collection agency to track down, McClary says.

Why Does a Credit Score Matter?

The importance of credit scores is indisputable – they provide lenders and other businesses valuable information to help decide whether to do business with you.

“The score is a scale upon which the lender measures the risk involved in extending you a line of credit or approving you for a loan,” McClary says.

For example, you could be denied credit – whether for a mortgage or a credit card – if your credit score is too low for the lender to be confident in your ability to pay back your debts. Sometimes you can get credit even with a low score, but your interest rate might be much higher than someone with a high score.

That’s why dealing with a missed payment as soon as possible and taking steps to improve your credit score are well worth doing and will pay off in the long run.

How to Limit the Financial Damage

The first step you need to take after a missed payment is to stem the financial bleeding, which could be accomplished by either making the payment right away or calling the credit card company and letting it know about your financial problems.

It’s in the company’s best interest to work with consumers and help them get back on track, says financial advisor and author Tarra Jackson.

Credit card companies understand that during tough economic times, people might be in financial trouble because of a situation that’s out of their hands, Jackson says. For example, if you worked in the restaurant or entertainment industries, you may have lost your job because the pandemic caused many of those businesses to lay off workers.

Credit card companies will have programs for hardships like these, but they won’t necessarily be posted on their websites for everyone to see, which is why it’s a good idea to ask about them, Jackson says.

Also, it’s important to show you have a willingness to pay, even if you don’t have the funds, she says.

“The deeper you are in a situation, the harder it is to make certain allowances,” Jackson says, adding that this is why you ought to reach out to issuers right after you lose your job. “The earlier the better to prepare them so they can put some things in place to help you.”

A hardship program could help you “avoid any impact at all depending on what you can do to permanently or temporarily restructure the account,” McClary says.

If you have skipped – or soon will miss – payments on multiple credit cards, you might find it tough to handle the back-and-forth with the issuer on your own. For help, you could consult with a nonprofit credit counseling agency and possibly get on a debt management plan.

How to Build Back Your Credit Score

If your credit score has taken a hit, it could take months – if not years – to get it back to where it was, depending on how high the score was and the frequency and severity of the missed payments.

Payment history accounts for 35% of a FICO score, which is why it’s so tough to bounce back quickly. It might take three to five months of strong payment history to get the score to turn around, Jackson says.

“The deeper you’re into it, the longer it takes,” Jackson says.

Missed payments will stay on your credit record for seven years from the date of activity, “but that doesn’t mean the impact on your credit score is there for the duration of the seven years,” McClary says. “The details of your report will reflect that information for some time, but there are things you can do to get back on track to the score you had before.”

There are a few steps you can take.

Make all of your payments on time going forward. A consistent payment pattern can only help your credit score. “If you just focus on that alone, you are focusing on one of the single biggest influencers on driving your score one direction or another,” McClary says.

Limit spending. All the hardship programs in the world won’t work if you can’t spend within your means. This is especially difficult if you just lost your job or have other major issues, such as medical costs or car repair bills. “Avoid getting into more debt,” Jackson says. “Practice financial abstinence, and stop applying for credit for a while until you can control it and manage the payments.”

Pay down your debt amounts. Another major factor in your credit score is utilization – the difference between the amount of debt you have on your card and your credit limit. This can be a particularly difficult problem if your credit limit is cut because of a missed payment, which could make your utilization rate climb much higher. This strategy will take time to have an effect and might be difficult if you’re facing financial problems.

Get a secured credit card or a credit-builder loan. These tactics are especially valuable if you have limited credit history or severely damaged credit and need to build trust among creditors that you can make payments on time. If your financial troubles were so severe that you lost the use of all credit cards, getting a secured one and using it responsibly can help you get back the ability to have a regular credit card. A credit-builder loan is another way to signal to lenders and credit bureaus that you can handle regular payments.

Become an authorized user. If you get added as an authorized user on a credit card account that belongs to a family member or close friend who has a strong payment history, it could “add some positive information to your credit report,” Jackson says.

Check your credit report. You can get free credit reports every week through April 2021, and it’s a good idea to review reports from all three credit bureaus to make sure all information is correct. “It might not just be that credit card that is causing the problem,” Jackson says. You should dispute incorrect information and have it changed or removed.

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